Question

Maxie's Game World sold games to a customer on credit for $2,600, terms 1/10, n/30 and the cost of the games was $1,700. When recording the sales transaction in its sales journal, Maxie's would enter:

- $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Cost of Goods Sold Dr./Inventory Cr. column.

- $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr. column.

- $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Accounts Payable Dr./Purchases Cr. column.

- $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Other Accounts Dr. column.

- $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cost of Goods Sold Dr./Inventory Cr. column.

Answer 1

To record the sales transaction in the sale Journal, Maxie should enter.

_$2,600 in the Accounts Receivable Dr./ Sales Cr. Column and $1,700 in the Cost of Goods Sold Dr./ Inventory Cr. Column.

Note 1: The sale is a credit sale. So we should Debit Accounts Receivable and credit the Sales Account with selling Price $2,600 .

Note 2: Whenever a sales occur, it reduces the inventory level, that means decrease in current asset. So Cost of goods Sold is debited and Inventory is credited by the cost price $1700.

Sale Journal : Otherwise known as Sale book or Sales Day book is used to enter all credit sales. Here, every Credit sale is debited to Accounts Receivable and credited to Sales Account.