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When selling products “on account” what are the four typical general ledger accounts that are impacted?...

When selling products “on account” what are the four typical general ledger accounts that are impacted? Explain the different columns of the Journal report. Will total debits and total credits always equal each other?

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Expert Solution

When selling products on account, two journal entries are prepared, the first one debiting accounts receivable and crediting sales revenue for the price of the goods sold and the second one debiting the cost of goods sold and crediting inventory for the cost of the sales. Thus, the four general ledger accounts typically impacted are:

  1. Accounts Receivable
  2. Sales revenue
  3. Cost of goods sold
  4. Inventory

The different columns of the Journal report are as under:

1. Date: The date of the transaction for which the journal entry is prepared.

2. Description: This column indicates the names of the accounts being debited and credited and includes a brief description of the transaction that is being recorded.

3. Posting Reference: This column indicates whether the journal entry has been posted to the general ledger accounts. The account number to which the debit and credit is posted are mentioned.

4. Debit: The amounts by which the accounts are being debited.

5. Credit: The amounts by which the accounts are being credited.

Please note, the journal is considered as the general journal for the question above since which journal has not been specifically mentioned.

If the transactions are correctly recorded, the total debits should always equal the total credits. However, if while recording the transactions the debits and credits for a particular entry are incorrectly recorded, there will be a difference between the two to the extent of the error.

ekkarill92 answered 2 years ago
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