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 In this blog, we continue looking at the sales transaction and T accounts journals, related to the sale on credit terms. So far, you have already learned about nominal accounts used for discounts and returns of goods.  How do we journal when goods are returned, but the customer has already paid? For a cash refund, I will use a Refund liability nominal account until it is paid through the bank to our customer. Other nominal codes are as usual Sales and Receivables to record a sale, then Cash and Receivables to show the payment is made, Sales Return and Sales to show the return of an item, Sales Return and Refund Liabilities to show that now we have a debt to pay to the client, and finally when the liability is cleared - Refund Liability and Cash nominal accounts. For simplicity, I omit the COGS and Inventory nominal accounts, but those would be the same and additional part as in the previous blog post. Example as follows, we sold on credit terms and received payment the next day in ful

 In the previous blog, we have discussed a sale for cash (an immediate payment for service and goods) and on credit terms (within the agreed time and after delivery of goods and services). In this post, I will explain the logic of the T-balance behind the sale discount, return of the faulty items. Assumptions are: all sales are made on credit terms, there will be Cost of Goods Sold (how much in total it costs to produce the goods for a saleable condition, not reselling the item in the same condition) and Inventory nominal accounts used. I will also use Sales Returns and Sales Discounts to show the movement in funds there.  First, let's look at the discount option: Sales Discount nominal account is offset against the Sales nominal account and thereby reduces the net sales. In the below example, we see a sale for £1000 and a discount of £50 if the payment is made earlier. Then we also noticed, that client has exercised the cash discount and paid earlier. Let's now see what happen

There are two main accounting types: accrual and cash. The difference between cash and accrual basis is simply in the recognition of date when the sales invoice is paid or when a business pays for the purchase invoice - cash basis, or when we raise a sales invoice (even if it is not paid yet) and when we receive a purchase invoice -so purchase invoice date. The cash basis benefit is when you are aware at any point in time of the cash at bank situation, whilst with accrual basis is cash plus receivables from clients and minus payables to our suppliers - payables.  The downside of using a cash basis is that we are not taking into consideration outstanding purchase invoices until we pay those. Whereas with an accrual basis, the control over cash flow is much better.  The recognition date also affects our financial reporting, when we cover a specific period for the Tax authorities or other institutions. like a bank for the lending facility.  There is another method-hybrid, which is less of

 Before we look more in detail at the financial statements, such as profit and loss (income statement) or balance sheet; we look into main financial statement elements and T-balances. The income statement consists of Sales (Revenue) less Expenses to derive the company's profit for the period in question. 

In this post, we will look at different examples of sales transactions, but before we start, let's see how to record double-entry without using the T-account.

The ledger summarises all business transactions in a way of the double-entry concept. For instance, we use Debit and Credit sides to add / or deduct, depending on the account. In very simple terms, if we have sold an apple as business to our customer - Mrs. Jones, we will record it as follows

  In the previous blog, we discussed the role and tasks of the bookkeeper. Amongst daily tasks bookkeepers are required to record the business transactions accurately and in a timely manner. The records should show how much we charged clients, how much we are charged by suppliers, how much we have received from clients, and how much we have paid to clients. 

B ookkeeping involves recording transactions on a daily basis in either paper or electronic form of the register to ensure every cent, brought into a business as income or spent for business needs is properly accounted for. As a part of the daily routine, the bookkeeper can be involved in various tasks: