Record journal entries for the following sales transactions of Flower Company.
Transactions
Oct. 12: Sold 25 bushels of flowers to a customer for $1,000 cash; cost of sale $700.
Oct. 21: Sold 40 bushels of flowers for $30 per bushel on credit. Terms of the sale are 4/10, n/30, invoice dated October 21. Cost per bushel is $20 to Flower Company.
Oct. 31: Received payment in full from the October 21 sale.
Journal entries:
| October 12 | | | |
|---|---|---|---|
| | | | |
| To record sale with cash. | | | |
| October 12 | | | |
| | | | |
| To record cost of sale. | | | |
| October 21 | | | |
| | | | |
| To record sale on account. | | | |
| October 21 | | | |
| | | | |
Answer (2)
The journal entries are recorded as follows:
October 12: Debit Cash $1 , 000 Credit Sales Revenue $1 , 000 Debit Cost of Goods Sold $700 Credit Inventory $$700
October 21: Debit Accounts Receivable $1 , 200 Credit Sales Revenue $1 , 200 Debit Cost of Goods Sold $800 Credit Inventory $$800
October 31: Debit Cash $1 , 152 Debit Sales Discount $48 Credit Accounts Receivable $$1,200
Examples
Understanding sales transactions and recording them accurately in journal entries is crucial for businesses to track their financial performance. For example, a small flower shop needs to keep track of its sales, costs, and payments to manage its cash flow and profitability. By recording each transaction, the shop owner can see how much revenue is generated, what the costs are, and how much cash is available. This information is essential for making informed decisions about pricing, inventory, and expenses. Accurate journal entries also ensure that the business complies with accounting standards and can prepare reliable financial statements.
The journal entries for Flower Company's sales transactions include recording cash and credit sales revenue, cost of goods sold, and the subsequent cash receipt with a discount. Each entry reflects the company's financial activities accurately and ensures proper accounting practices. The cash received is calculated considering discounts for early payment.
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