Business Sales Accounting Approach

Business sales is a term used to describe how revenue or income were generated through sale of merchandise.

Revenue is in accounting terms the amount earned from a business’s main activities such as selling merchandise or providing services.

Income is sometimes used instead of the word revenue:
Some people refer to the rent they receive as rental income. Also, a retailer’s income from business operations is sales minus the cost of goods sold minus operating expenses.

Reporting

Always report business sales in the accounting period in which title to the merchandise was transferred to the customer. For example if your reporting format is monthly, then you should report all sales against which title transferred to the customer between the first and closing days of the relevant month.

Recommended Process

You need a simple routine procedure to keep track of your business sales.

Every time you make a sale, issue an invoice.

• Give every invoice an original serial number (1, 2, 3 and so on) and keep a copy of each.


• File the copies of unpaid invoices in Sales Unpaid.

When an invoice is paid, pay the customer’s check into your account, using the paying-in book provided by the bank.

• On the stub of the paying-in slip write the date, invoice number(s) and amount(s).


• Take the invoice from the Business Sales Unpaid file. Write ‘paid’ plus the date in the top right-hand corner.


• File the invoice in Sales Paid.

Put the most recently paid invoice on the top. The invoices will automatically be in the order they were paid.

Once a week, update your Cash Book or software package.

• Look through your paying-in book stubs. Enter into the Cash Book details of all the invoices paid.


• Check the Cash Book entries against the invoices in the Business Sales Paid file.

Put a tick against the invoice number on the invoice to show that the invoice details have been entered into your Cash Book.

Once a week check through your unpaid invoices and chase any that are falling due.

Everything should match. Invoices should be in the same order as entries in the Cash Book, which is in the same order as your bank statement.

Non-Business sales income

From time to time your business will have other income apart from sales. These might include:

• New loans or grants.


• Interest on your deposit account.


• Equipment disposals.

Common Accounting and Business sales Terms

sales allowances

An allowance granted to customers who had purchased merchandise. You may grant or be granted a sales allowance because of a pricing error, an error in shipping, etc. this is usually to create a guarantee that the customer does not return the merchandise.

sales discounts

This refers to discounts you allow to your customers if they pay amounts owing within a specified time period. You may find it necessary to give discounts as an inducement for encouraging early payments in order to acquire the much needed cash or to boost business sales.

Return from Business Sales To Book-Keeping.