A cash sale is paid at once, so you debit Cash or Bank and credit Sales. A credit sale is paid later, so you debit the customer’s account and credit Sales. The later payment is recorded separately: debit Cash or Bank, credit the customer.
This skill builds on choosing debit and credit from account type and appears in ledger questions, day books and receivables topics.
Why does the customer get their own account?
When goods are sold on credit, the business has a right to collect money later. That right is an asset, so the customer’s account is debited and increases. The business needs to know who owes how much, so each customer has an individual account.
A cash sale creates no amount owed. The money arrives immediately, so there is nothing to track afterwards.
How do you record each type step by step?
- Ask when the money arrives: now or later.
- Always credit Sales for the selling price, because income has been earned.
- If paid now: debit Cash (or Bank).
- If paid later: debit the customer’s account.
- When the customer pays: debit Cash or Bank, credit the customer’s account.
Worked example
Seri Hardware is a fictional shop.
On 4 May it sells tools for RM450 to a walk-in customer who pays cash. On 6 May it sells paint for RM1,200 to Kumar Traders, who will pay later. On 20 May Kumar Traders pays the full RM1,200 by bank transfer.
4 May, cash sale. Debit Cash RM450; credit Sales RM450.
6 May, credit sale. Debit Kumar Traders RM1,200; credit Sales RM1,200.
20 May, customer pays. Debit Bank RM1,200; credit Kumar Traders RM1,200.
The Sales account now holds credits of 450 + 1,200 = RM1,650. Kumar Traders’ account has a debit of RM1,200 and a credit of RM1,200, so nothing is owed. Notice that Sales was not credited again on 20 May, because the sale was already recorded on 6 May.
What mistake should you watch for?
A common slip is to record a credit sale as if the cash had arrived.
Mistaken entry: Sale of goods to Kumar Traders on credit, RM1,200. The student writes: debit Cash RM1,200, credit Sales RM1,200.
The student focused on the sale and forgot that no money was received.
This overstates Cash by RM1,200 and hides the amount Kumar Traders owes. The entry balances but is wrong. Correct entry: debit Kumar Traders RM1,200; credit Sales RM1,200.
Ask “has any money arrived today?” before touching Cash.
Check yourself
1. Seri Hardware sells goods for RM760 on credit to Lim. Give the debit and credit.
Show answer
Debit Lim RM760; credit Sales RM760.
2. The shop sells goods for RM300 and the customer pays by bank card straight away, so the money goes into the bank. Give the debit and credit.
Show answer
The customer has paid, so this is treated like a cash sale. Debit Bank RM300; credit Sales RM300.
3. Lim pays RM400 of the RM760 in cash. Give the entry and state how much Lim still owes.
Show answer
Debit Cash RM400; credit Lim RM400. Lim still owes 760 − 400 = RM360.
Where does this lead next?
The next step is to move such entries into ledger accounts with references: post ledger entries with clear references. The double-entry and ledger trainer gives fictional cash and credit sales to practise on.
If you can record a sale in class but hesitate when the wording mixes payment methods, online one-to-one Accounting tuition gives you a teacher who can set mixed-payment variations until the distinction feels natural.