This Easter, learn how to record cash sales with a discount

  1. With the Easter season around the corner, all stores would be exploding with all kinds of sales! Having sales and offering discounts are a big part of any shop – from the little bakery down the road to the biggest retailers having global presence. While this is an excellent idea, how do small and medium businesses record these discounted prices in their bookkeeping journals?

    In this blog we use an example to cover one of the most rudimentary ways to make a double-entry bookkeeping journal entry when selling products or services for cash at discounted rates. [Do note that this pertains specifically to cash payments].

    Let’s say you maintain the books at a confectioner’s shop.

    A customer has bought:

    • 2 bags of gummies for $8
    • 1 box of sesame sweets for $11
    • 1kg of baklava for $18

    Scenario 1:

    To understand bookkeeping during sales, first let’s take a look at a regular journal entry when you’re offering the full price.

    Cash sale journal entry (for goods sold at full price)

    • The total sale value is $37.
    • If sales tax in inclusive, you can skip this point. If not, let’s assume sales tax at 6%. Which is $2.22.
    • So the total sales value your customer pays including tax is $39.22.

    How to enter the sale:

    1. Since this is pretty straightforward, you enter a debit for this amount of $39.22 in your checking
    2. Next you enter a credit for the same amount in your sales and sales tax collected

    All entries on the debit side should always tally with entries on the credit side (or vice versa).

     

    Scenario 2:

    Now let’s say you are having an Easter sale and offering all confections at a discounted rate of 10%. Using the same customer as an example, note the additional calculation required.

    Cash sale journal entry (for goods sold at a discounted rate of 10%)

    • The total sale value is $37.
    • Again, if sales tax in inclusive, you can skip this point. If not, let’s assume sales tax at 6%. Which is $2.22.
    • So the sales value including tax is $39.22.
    • The 10% discount means subtracting $3.9 (rounded off amount).
    • So the customer pays $35.32.

    How to enter the sale:

    1. Debit entries:
      1. You first enter a cash debit in your checking account for the sale value inclusive of the 10% discount, i.e. $35.32.
      2. You then make another debit entry for just the discounted amount, i.e. $3.9.
    2. Credit entries:
      1. Next, move to the credit side and make an entry for the sales ($37)
      2. Then add sales tax collected ($2.22).

    You will notice that the total value of all entries on the debit and credit side for this transaction tally.

    While this is a fairly simple example using small transactional values, it works the same for the bigger cash sales transactions, too, that you would be expecting this Easter, or for any other season for that matter!

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