Basically, the sources of income of a business firm are either the receipts from sale of goods or receipts from providing the services. That is why, when the goods are sold by the business firm then it will be called as sales. Goods mean the trade-able items only which are produced by the firm or purchased by the firm for selling purpose.  Therefore, the sale of fixed assets or other items not relating to trading items, must not be treated as sales.

Sales can be divided in two parts;  cash sales and credit sales. In case of credit sales the customers do not pay cash immediately but payment is received from them in future as agreed by both the parties.  In case of cash sales, cash is received immediately at the time of sale only. All the credit sales are entered in sales day book and the cash sales are entered in cash book. Both types of sales are posted in sales account in to the ledger. The total of sale account is shown in credit side of trial balance. In trading account, the sale is shown in credit side.

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