Sales (accounting)

In bookkeeping, accounting, and finance, Net sales are operating revenues earned by a company for selling its products or rendering its services. Also referred to as revenue, they are reported directly on the income statement as Sales or Net sales.

In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales. Sales are the unique transactions that occur in professional selling or during marketing initiatives.

Revenue is earned when goods are delivered or services are rendered.[1] The term sales in a marketing, advertising or a general business context often refers to a free in which a buyer has agreed to purchase some products at a set time in the future. From an accounting standpoint, sales do not occur until the product is delivered. "Outstanding orders" refers to sales orders that have not been filled.

Consulting fee.

A sale is a transfer of property for money or credit.[2] In double-entry bookkeeping, a sale of merchandise is recorded in the general journal as a debit to cash or accounts receivable and a credit to the sales account.[3] The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. A discount from list price might be noted if it applies to the sale.

Fees for services are recorded separately from sales of merchandise, but the bookkeeping transactions for recording "sales" of services are similar to those for recording sales of tangible goods.

Gross sales and net sales

General Journal - Merchandise return example
Date Description of entry Debit Credit
8-7 Sales Returns and Allowances 20.00
  Accounts Receivable 20.00
Full credit for customer return of merchandise purchased on account.
8-7 Inventory 15.00
  Cost of Goods Sold 15.00
Restore returned merchandise to inventory.

Gross sales are the sum of all sales during a time period. Net sales are gross sales minus sales returns, sales allowances, and sales discounts. Gross sales do not normally appear on an income statement. The sales figures reported on an income statement are net sales.[4]

input vat - output vat

sales of portfolio items and capital gains taxes

Sales Returns and Allowances and Sales Discounts are contra-revenue accounts.

In a survey of nearly 200 senior marketing managers, 70 percent responded that they found the "sales total" metric very useful.[5]

General Journal - Sales discount example
Date Description of entry Debit Credit
9-1 Accounts Receivable (Customer A) 500.00
  Sales 500.00
Merchandise sale on account, terms 2/10, n/30.
9-7 Cash 490.00
Sales Discounts 10.00
  Accounts Receivable (Customer A) 500.00
A/R paid by Customer A, taking a 2% discount.

Revenue or Sales reported on the income statement are net sales after deducting Sales Returns and Allowances and Sales Discounts.

Sales $2,000.00
Less Sales returns and allowances $20.00
Sales discounts $10.00 $30.00
Net sales $1,970.00

Unique definitions

When the US government reports wholesale sales, this includes excise taxes on certain products.[6]

Other terms

Net sales = gross sales – (customer discounts, returns, and allowances)
Gross profit = net salescost of goods sold
Operating profit = gross profit – total operating expenses
Net profit = operating profit – taxes – interest
Net profit = net salescost of goods soldoperating expense – taxes – interest


  1. Meigs & Meigs, Financial Accounting, Fourth Edition McGraw-Hill, 1983. p.124.
  2. Random House Dictionary, Revised Edition, 1975.
  3. Pinson, Linda and Jerry Jinnett. Keeping the Books, Second Edition Upstart Publishing Company, Inc., 1993. p. 15. This is a simplified example.
  4. Williams, Jan R.; Haka, Susan F.; Bettner, Mark S.; Carcello, Joseph V. (2006). Financial Accounting (12th ed.). Boston, Mass: McGraw-Hill/Irwin. pp. 261–263. ISBN 0-07-288467-3.
  5. Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeiffer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project.
  6. Monthly Wholesale Trade Survey Definitions Statement
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