When goods are sold in a cash, the sales account is credited. Cash belongs to real accounts and according to the rule of real account assets coming into business debited. On the other hand, in the case of cash sales, income from sales is credited. Similarly, when goods are sold for cash, assets increase in the form of cash and increase the income of the business.
Therefore, by applying the rules of debit and credit, the cash account is debited and the sales account is credited. In the case of credit sale of goods, the customer receives the goods from the business with a promise to pay cash at later date. The customer is a person who belongs to a personal account and according to the rule of this account receiver’s account is debited. Similarly, since the customers are a debtor who owes the business the number of goods sold to her /him, is also treated as an asset. Like cash sales, there is an increase in assets in the form of debtor due to credit customer’s account is debited and the sales account is credited.
Sometimes, the sold goods are returned from the customer due to some reasons. In the case of return of sold goods, goods come into the business, therefore, the income decreases. The customers belong to a personal account and the sales return account belongs to a nominal account. The customer/debtor’s account is debited.
Another Important Accounting Topic: Budge Expenditure.