Before we go further, we have to understand the what are goods. Goods are item which are purchased to be sold .
Sales accounts are made when goods purchase is sold.
Sales account is nominal by nature or some considered it as real account as goods can be feel and touch . So as per nominal account we credit all income and gains and sales are made by adding profit to the goods purchased . suppose we purchase goods for Rs. 400 and sold it for Rs 500 here we are adding profit of Rs 100 therefore sale is generally including profit.
Example Sold goods Rs 500.
Here we are selling goods which we have in business.
Journal entry of the above will be
Cash A/c | 500 |
To sales A/c | 5000 |
(being goods sold for cash) |
When goods sold and it’s not mentioned how then the other account will be cash accounts as it assumes that goods sold are in cash .
Goods sold by adding profit 10% to its purchase price Rs. 1000.
Note : As we mention earlier goods are sold by adding profit means the goods which we have a value of Rs 1000 and if we add profit to it its value will be Rs 1100.therfore the journal entry of the above will be .
Cash A/c Dr. | 1100 |
To sales A/c | 1100 |
(being goods sold for cash) |