The Basics of Double Entry Bookkeeping


The Basics of Double Entry Bookkeeping

Sales are basically activities pertaining to the volume of products sold within a specific targeted time frame. A sale is also termed as a transaction. It is a transaction in which an exchange of one thing for another thing has been made. The products sold may be physical products or services such as computer software, office supplies, and the like. The term sales person therefore refers to any person who sells something and is paid for the same.

Net sales also referred to as gross sales include those sales not involving sales. These include net sales from the services rendered by the firm and from the firm’s products sold. Net sales do not include the gross value of sales since they do not relate to the value of goods sold. Hence, net sales does not include the gross value of sales. This means that the firm’s net profit is not the same as its gross profit.

The gross sales and net sales refer to the total revenue gained by the firm during a particular year. They are not to be compared because their values may differ depending on circumstances. While a firm earns profits, the gross sales and net sales refer to that revenue being generated at the end of a particular year by the firm. The gross sales includes the value of goods sold while a firm maintains inventories while the net sales relate to the value of inventories. There is another common practice in double-entry bookkeeping where the gross sales and net sales are compared to determine the net profit at the end of a year.

The difference between the gross sales and net sales in the income statement then refers to net profit earned by the company. The income statement shows how much revenue was generated during the year. The balance sheet then reports the financial transactions resulting in the net sales and expenses. Double-entry bookkeeping uses these records to record the income statement, balance sheet, and net profit and to determine the viability of the company as a going concern. Many companies which do not comply with the double-entry bookkeeping practices eventually collapse as the method of recording transactions makes them appear too immaterial for their shareholders.

Marketing groups consist of the selling force, the advertising sales force, and the public relations department. All these groups are necessary for the success of any firm. Sales people, accountants, marketing managers, and consultants are part of the sales force. The selling force consists of manufacturers, wholesalers, distributors, and retail store owners. The selling force also includes bank tellers and customer service representatives.

Advertising and marketing are necessary for sales. The marketing managers plan the sale of the products according to the budget. Consultants make sure that the sale of the products like the services, goods, and technology meet the requirements of the consumers. The consultant also plans the distribution system according to the capacity to sell.