When selling inventory, what is the journal entry for recording a sale of $5,000 with a cost of goods sold of $3,000?

The correct journal entry for selling inventory involves recognizing both the revenue generated from the sale and the cost associated with the merchandise sold. When a sale occurs, cash or accounts receivable must be debited for the total amount of the sale, which in this case is $5,000. This reflects the cash inflow or the amount owed by the customer.

Simultaneously, revenue must be credited to indicate the income earned from the sale, which is also $5,000. This entry recognizes the increase in owner's equity resulting from the sale.

In addition to recording the revenue from the sale, it’s essential to account for the cost of goods sold (COGS). In this scenario, the COGS is $3,000, which represents the expense incurred from selling the inventory. To properly reflect this in the accounts, COGS is debited, indicating an increase in expenses, while inventory must be credited to reflect the decrease in assets as the inventory has now been sold.

Thus, the complete journal entry for this transaction consists of debiting Cash (or Accounts Receivable) for $5,000, crediting Revenue for $5,000, debiting COGS for $3,000, and crediting Inventory for $