general ledger entry: sold $700 of merchandise (that had cost $220) on credit to Sam's Company.
To record the general ledger entry for selling merchandise on credit to Sam's Company, you would need to make journal entries in the accounts involved. The accounts that are typically affected in this type of transaction are:
1. Sales Revenue: This account represents the income earned from selling goods or services. It is a revenue account and should be credited.
2. Cost of Goods Sold (COGS): This account represents the cost associated with producing or purchasing the goods that were sold. It is an expense account and should be debited.
3. Inventory: This account represents the value of the goods held for sale. It is an asset account and should be credited with the cost of the goods sold.
4. Accounts Receivable: This account represents the amount owed to the company by its customers. It is an asset account and should be debited with the selling price of the goods.
With that in mind, here's how you can record the general ledger entry for the given transaction:
1. Debit Accounts Receivable: $700
Credit Sales Revenue: $700
(This entry records the revenue generated from the sale)
2. Debit Cost of Goods Sold: $220
Credit Inventory: $220
(This entry records the cost of the goods sold)
After making these journal entries, you would post them to the respective general ledger accounts. This information can then be used to prepare financial statements and track the company's performance.