Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 5 - Merchandising Operations and the Multiple-Step Income Statement - Self-Test Questions - Page 258: 5


Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

Work Step by Step

The reason is that in, in accordance with the revenue recognition principle, companies record sales revenue, like service revenue, when the performance obligation is satisfied. Furthermore, every sales transaction should be supported by a business document that provides written evidence of the sale.
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