How are sales transactions typically recorded in the journal using debits and credits?

• A. Debit Accounts Receivable or Cash; Credit Sales Revenue
• B. Debit Inventory; Credit Sales Revenue
• C. Debit Sales Revenue; Credit Accounts Receivable or Cash
• D. Debit Sales Revenue; Credit Inventory

Answer: (A)

Verified step by step guidance

1. Understand the nature of the sales transaction: Sales transactions involve the exchange of goods or services for cash or credit. This impacts multiple accounts, including revenue, inventory, and accounts receivable or cash.
2. Identify the accounts affected: When a sale is made, revenue is earned, inventory is reduced, and either cash or accounts receivable is increased depending on whether the sale is made on credit or for cash.
3. Apply the rules of debits and credits: In accounting, debits increase asset accounts (e.g., Accounts Receivable or Cash) and decrease liability or equity accounts. Credits increase revenue accounts (e.g., Sales Revenue) and decrease asset accounts (e.g., Inventory).
4. Record the revenue side of the transaction: Debit Accounts Receivable or Cash to reflect the increase in assets, and Credit Sales Revenue to record the earned revenue.
5. Record the inventory side of the transaction: Debit Inventory to reflect the reduction in goods sold, and Credit Cost of Goods Sold (COGS) to account for the expense associated with the sale.