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What are sales?

Author:
Harold Averkamp, CPA, MBA

Definition of Sales

In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc.

When a company sells a noncurrent asset that had been used in its business (old delivery truck, display counters, company car, etc.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.)

Example of Sales

The amounts recorded at the time of the sales transactions are known as gross sales. The gross sales minus subtractions for sales returns, sales allowances, and early payment discounts is known as net sales.)

Under the accrual basis or accrual method of accounting, goods sold on credit are reported as sales (revenue) when the goods have been transferred to the buyer. Usually this occurs before the seller receives payment from the buyer. The sales on credit are recorded with a debit to Accounts Receivable and a credit to Sales.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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