How would you record a cash sale with no VAT?

• A. Dr Sales; Cr Cash/Bank.
• B. Dr VAT; Cr Revenue.
• C. Dr Cash/Bank; Cr Sales.
• D. Dr Inventory; Cr Cash/Bank.

Answer: (C)

In a cash sale, you receive money and earn revenue at the same time. Since there’s no VAT to account for, you don’t touch any VAT accounts. The money coming in should be recorded as a debit to Cash/Bank, and the income from the sale should be recorded as a credit to Sales. This reflects the increase in assets (cash) and the increase in income (sales).

If the sale had VAT, you would also record VAT Output and adjust the revenue accordingly, and you might later record a separate entry for the cost of goods sold. The other options would either debit revenue (which would reduce income), involve VAT unnecessarily, or relate to inventory/purchases rather than the sale itself.