Mastering Accounting Transactions: Understanding Double-Entry Bookkeeping for Cash Sales, Payments on Account, Salaries, and Collections

Sale of services for cashPayment on accountPayment of salariesCollection on account

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1. Sale of services for cash:
This refers to the transaction where a company sells services to a customer and receives cash payment for the services immediately. The revenue from the sale of services is recognized at the time of the sale, and the cash received is recorded as an increase in the company’s cash account. The double-entry for this transaction would be:

Debit: Cash Account
Credit: Revenue Account

2. Payment on account:
This is when a company pays for goods or services that they have received on credit. It means that the company has received the goods or services but has not yet paid for them in cash. The double-entry for this transaction would be:

Debit: Accounts Payable Account
Credit: Cash Account

3. Payment of salaries:
This refers to the transaction where a company pays its employees for the services they have provided. The salary expense is recognized when the payroll is processed, and the cash paid to the employees is recorded as a decrease in the company’s cash account. The double-entry for this transaction would be:

Debit: Salary Expense Account
Credit: Cash Account

4. Collection on account:
This is when a company receives payment from a customer for goods or services that have previously been sold on credit. The double-entry for this transaction would be:

Debit: Cash Account
Credit: Accounts Receivable Account.

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