How to Calculate Credit Sales

Step-by-Step Guide

1. 1

   Step 1: Understand credit sales.

   Credit sales are distinct from cash sales in that the customer is not required to make a full payment on the date of sale.
   
   Instead, they purchase their order on account and are allowed a set amount of time in which to make payments.
   
   From a business's perspective, this transaction is recorded as revenue, even though payment has not been received.
   
   In addition, the amount of the sale is added to "Accounts Receivable," an asset account that records the amount of money owed to the business by its customers.
   
   When orders are paid for, the Accounts Receivable account is reduced for the amount of the order and cash is increased.
2. 2

   Step 2: Sum up individual credit sales.

   The simplest method used to find total credit sales is to maintain your Accounts Receivable account and to update it for each sale made on credit.
   
   This method is most accurate as it accommodates for changing product prices as well as all cash sales.
   
   If you want a total for annual or quarterly credit sales, you can simply start recording a credit sales amount at the beginning of that period.
   
   Then, each time you update accounts receivable, you can add to the sale amount to your credit sales amount for that period.
   
   Remember that sales tax is included in credit sales amounts., Total sales can be calculated as number of goods sold multiplied by the selling price.
   
   However, this can be complex if you offer different products at different prices.
   
   For example:
   If a company sold 100 unites of laptops at $100 a piece, its sales would be 100×100=$10,000{\displaystyle 100\times 100=\$10,000}.
   
   To calculate credit sales, start by finding the cash received.
   
   Lets assume that the customers on an average paid $60 in cash for those 100 laptops, so cash received would be $6000.
   
   Then, you can calculate credit sales by reducing total sales by total cash received.
   
   The credit sales would be equal to total sales minus cash received, which in this example is $10000−$6000=$4000{\displaystyle \$10000-\$6000=\$4000}., The initial value at the start of the year can be seen from the balance sheet of the company.
   
   Let's assume the value to be $10000.
   
   Start by finding the ending accounts receivable.
   
   It is the value at the end of the year which can also be found out from the balance sheet itself just like initial accounts receivables.
   
   Let's assume it to be $5000.
   
   Then, determine the cash received.
   
   This should be in the company's records.
   
   Let the cash received for the year be $20000.
   
   Finally, calculate credit sales by finding the difference.
   
   So the credit sales can be calculated as (cash received
   - initial accounts receivable + ending accounts receivable).
   
   In the example above, it would be $20000
   - $10000 + $5000 = $15000.
   
   So the credit sales would be $15000 for the year.
3. 3

   Step 3: Calculate credit sales from total sales.

4. 4

   Step 4: Calculate credit sales from accounts receivables.

Detailed Guide

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