Journal Entry for Cash and Credit Transactions

Transactions related to the purchase and sale of goods can be of two types, Cash or Credit. 

A. Cash Transactions: Cash transactions are those transactions in which payment is made or received in cash at the time of purchase or sale of goods. Cash transactions can be identified by:

• When the Name of the Party and Cash both are given in the transaction;
• When only Cash is given in the transaction;
• When the Name of the Party and Cash both are not given. 

Journal Entry: 

 

Example:

1. Goods purchased from Bijay for Cash ₹5,000; or 
2. Goods purchased for cash ₹5,000; or
3. Goods Purchased for ₹5,000.

Solution: For all these three cases, a common journal entry will be passed:

 

Example:

1. Goods sold to Gaurav for Cash ₹10,000; or 
2. Goods sold for cash ₹10,000; or
3. Goods sold for ₹10,000.

Solution: For all these three cases, a common journal entry will be passed:

 

B. Credit Transactions: Credit transactions are those transactions in which payment is not made or received at the time of purchase or sale of goods. Credit transactions can be identified by:

• When only the Name of the Party is given in the transaction.

Journal Entry: 

 

Example: Goods purchased from Akanksha ₹7,000.

Solution: 

 

Example: Goods sold to Sabya ₹11,000.

Solution: