Sales · Level: Basics
Journal entry: Cash sale
The customer pays cash at once. Cash increases by the gross amount; Sales and Output VAT are credited.
Worked example
A customer buys goods for £180.00 plus 20% VAT and pays in cash.
Correct journal entry
Cash £216.00 / Sales £180.00, Output VAT £36.00
Debit
Cash£216.00
Credit
Sales£180.00
Output VAT£36.00
Why?
- Cash: asset increases → debit
- Sales: income earned → credit
- Output VAT: liability increases → credit
Calculation
- VAT: 20% of £180.00 = £36.00
- Gross amount: £180.00 + £36.00 = £216.00
Typical mistake
Crediting the whole gross amount to Sales.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
A customer buys goods for £410.00 plus 20% VAT and pays in cash.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for cash sale?
Example: Cash £216.00 / Sales £180.00, Output VAT £36.00.
How do I recognise this case?
The customer pays cash at once. Cash increases by the gross amount; Sales and Output VAT are credited.
What is the typical mistake?
Crediting the whole gross amount to Sales.