Journal Entry for Sales and Purchase of Goods
Goods are those items in which a business deals. In other words, goods are the commodities that are purchased and sold in a business on a daily basis. Goods are denoted as ‘Purchases A/c’ when goods are purchased and ‘Sales A/c’ when they are sold.
Goods Account is classified into five different accounts for the purpose of passing journal entries:
A. Purchases Account: When goods are purchased in cash or credit, donated, lost, or withdrawn for personal use, in all these cases, Goods are denoted as Purchases A/c.
- Goods purchased for cash
- Goods Donated
- Goods are withdrawn for personal use
- Goods lost by fire
- Goods purchased in cash ₹25,000.
- Goods worth ₹5,000 were given as a donation.
- Goods worth ₹1,000 taken away for personal use by proprietor.
- Goods lost by fire ₹2,500
B. Sales Account: When goods are sold, then it is represented as Sales A/c.
- Goods sold to Nupur on credit worth ₹2,000.
- Goods sold to Gaurav for cash ₹5,000.
C. Purchase Return or Return Outwards Account: When purchased goods are returned to the supplier, it is denoted as Purchase Return A/c or Return Outwards A/c.
Example: Goods purchased worth ₹2,000 from Shubham were returned.
D. Sales Return or Return Inwards Account: When goods sold are returned by the customers, it is termed as Sales Return or Return Inwards A/c.
Example: Goods sold to Nupur were returned worth ₹1,000.
E. Stock: The leftover unsold goods at the end of a financial year are represented through stock. Closing Stock is the valuation of goods leftover at the end of a financial year, and Opening Stock is the valuation of goods an enterprise has at the beginning of a financial year.