Sales - What are sales?

A sale is an exchange of money for goods, services or other property. In accounting, net sales refer to the operating revenues earned by a company by selling their products or services.

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The definition of the term ‘sales’ in business varies depending on the specific context in which it’s used. 

In general business operations, sales refer to any transactions where money or value is exchanged for the ownership of a good or entitlement to a service. In an accounting context, sales refers to a company's revenue earned from the sales of products or services (net sales).

Sales in accounting

When bookkeeping, a company’s net sales are reported on the profit and loss account as ‘Sales’ or ‘Net sales’.

Sales are the unique transactions that occur in professional selling or during marketing initiatives. From an accounting point of view, sales don’t occur until the product is delivered. In financial ratios that use sales values from the profit and loss account, ‘sales’ refers to net sales, not gross sales. 

  • Gross sales include all of the sales, before refunds or other deductions are removed from the total amount

  • Net sales refer to the amount of revenue made in sales after any refunds and deductions are removed and are a truer reflection of the earnings

Sales in double-entry bookkeeping

When using the double-entry bookkeeping method, a sale is recorded in the journal as a debit to cash or accounts receivable, and as a credit to the sales account.

The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. This means that the sale is recorded after any discounts, tax, or otherwise have been applied.

Sales in general business operations

In a general business context, sales involve an exchange of money or value for either a transfer of the ownership of a good or property or the entitlement to a service.

Elements that must be present in order to make a sale valid are:

  1. The competence of both the seller and the buyer to enter into a contract

  2. Mutual agreement on the terms of exchange

  3. Something that is capable of being transferred (a good, an ownership title, entitlement to a certain service, etc.)

  4. A consideration in money (or its equivalent in value) paid or promised

Sales in accounting & invoicing software

Today, online accounting and invoicing software gives you the tools to manage your sales process from order to payment no matter where you are. 

With SumUp Invoices, if you make a sale and invoice your customer, the customer’s payments will be automatically matched to the correct invoice when they pay via the online payment link. The invoice will be marked as paid, informing you that the sales process is complete.

You can also enter payments on an invoice even while on the go, via the SumUp app. Staying on top of your sales has never been simpler.