The sales and purchases journals record the net amount on the invoice, after trade discount. A return is recorded at the same net price per unit that was invoiced.
This lesson is part of books of prime entry. If you are unsure which book a transaction belongs in, go back to choosing the correct journal.
How is an invoice recorded?
Work out the net amount first, then enter it. The journal line names the customer, the invoice number and the net figure.
The customer’s account is debited and the Sales account is credited, because the customer owes more and the business has earned revenue.
Worked example: an invoice and a partial return
Kedai Borneo sells 50 units at RM12 each to Kedai Lim on 4 March. A trade discount of 10% is given.
- List amount: 50 × 12 = RM600.
- Trade discount: 10% × 600 = RM60.
- Net invoice: 600 − 60 = RM540, entered in the sales journal.
On 9 March, Kedai Lim returns 5 faulty units.
- Net amount per unit: 12 × 90% = RM10.80.
- Return value: 5 × 10.80 = RM54, entered in the sales returns journal.
Kedai Lim’s account then shows a debit of RM540 and a credit of RM54, so the balance owed is RM486.
| Book | Debit | Credit | Amount |
|---|---|---|---|
| Sales journal | Kedai Lim | Sales | RM540 |
| Sales returns journal | Sales returns | Kedai Lim | RM54 |
The mistake that costs marks
There are two slips here. One is entering the list amount RM600 and ignoring the discount. The other is valuing the return at the listed RM12 per unit, which gives RM60.
| Step | Wrong | Right |
|---|---|---|
| Sales journal | RM600 | RM540 |
| Return of 5 units | RM60 | RM54 |
| Balance owed | RM540 | RM486 |
The working looks tidy either way, so the fix is to build the net price per unit first and use it for both lines.
How does the purchases side mirror this?
Suppose Kedai Borneo buys goods from Bakar Trading instead. The purchases journal records the net invoice, and the purchases returns journal records goods sent back at the net price.
The debit and credit swap sides: the purchases account is debited and the supplier is credited.
Check yourself
Kedai Borneo buys 80 units at RM5 each from a supplier, with a trade discount of 20%. It returns 10 units. What is the net invoice, the return value and the amount still owed?
Answer
List amount: 80 × 5 = RM400. Trade discount: 20% × 400 = RM80. Net invoice: RM320.
Net amount per unit: 5 × 80% = RM4. Return: 10 × 4 = RM40.
Amount still owed: 320 − 40 = RM280.
What to study next
Continue with recording transactions in a cash book. For a teacher to check your journal lines directly, see online one-to-one Accounting tuition.