CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle
On 1 April, Sunita Stores sold goods costing Rs 40,000 to Dev for Rs 55,000 on credit. Which journal entry is correct in the books of Sunita Stores?
Debit Dev Rs 55,000 and credit Sales Rs 55,000. Sales are recorded at selling price, not cost; Dev becomes a debtor and receives the benefit so he is debited, while sales income is credited.
- ADev A/c Dr 55,000 to Sales A/c 55,000Correct
- BDev A/c Dr 40,000 to Sales A/c 40,000
- CSales A/c Dr 55,000 to Dev A/c 55,000
- DDev A/c Dr 55,000 to Purchases A/c 40,000 and Profit A/c 15,000
Explanation
Credit sales are recorded at selling price, Rs 55,000. Dev is a debtor (personal account, receiver of benefit) and is debited, and Sales (nominal income) is credited. Recording at cost of 40,000 understates sales.
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