Sales · Level: Exam
Journal entry: Sale partly paid at once, partly on credit
The customer pays part at once and the rest later. Bank and Trade receivables are debited, together the gross amount.
Worked example
We sell goods to Wright plc for £7,000.00 plus 20% VAT. The customer pays £3,100.00 by bank transfer at once; the rest is on credit.
Correct journal entry
Bank £3,100.00, Trade receivables £5,300.00 / Sales £7,000.00, Output VAT £1,400.00
Debit
Bank£3,100.00
Trade receivables£5,300.00
Credit
Sales£7,000.00
Output VAT£1,400.00
Why?
- Bank: asset increases → debit
- Trade receivables: asset increases → debit
- Sales: income earned → credit
- Output VAT: liability increases → credit
Calculation
- VAT: 20% of £7,000.00 = £1,400.00
- Gross amount: £7,000.00 + £1,400.00 = £8,400.00
- On credit: £8,400.00 − £3,100.00 = £5,300.00
Typical mistake
Booking the receivable at the net amount instead of the rest of the gross amount.
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
We sell goods to Walker & Co for £1,000.00 plus 20% VAT. The customer pays £300.00 by bank transfer at once; the rest is on credit.
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 sale partly paid at once, partly on credit?
Example: Bank £3,100.00, Trade receivables £5,300.00 / Sales £7,000.00, Output VAT £1,400.00.
How do I recognise this case?
The customer pays part at once and the rest later. Bank and Trade receivables are debited, together the gross amount.
What is the typical mistake?
Booking the receivable at the net amount instead of the rest of the gross amount.