[Q1] The entity sold merchandise at the sale price of $50,000 on account.
The cost of merchandise sold was $30,000.
Prepare a journal entry to record this transaction.
[Journal Entry]
When merchandise is sold, two journal entries are recorded.
(1) Journal entry to record sales revenue
(2) Journal entry to record the cost of sales
This is the journal entry to record sales revenue.
| Debit | Credit | |
| Accounts receivable | 50,000 | |
| Sales revenue | 50,000 |
[Notes]
Debit: Increase in accounts receivable
Because the merchandise is sold on account, accounts receivable balance increases.
Credit: Increase in sales revenue
[Journal Entry]
This is the journal entry to record the cost of sales.
| Debit | Credit | |
| Cost of sales | 30,000 | |
| Merchandise | 30,000 |
[Notes]
Debit: Increase in cost of sales
Credit: Decrease in merchandise
When merchandise is sold, the quantity of merchandise owned by an entity decreases.