In a cash sale with no VAT, which entry is correct?

• 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)

When a sale is paid for at the time of the transaction, you record the cash received and the revenue earned. Since this is a cash sale with no VAT, there’s no VAT liability to account for. The appropriate entry is to debit the cash asset to show the money received and credit sales to record the income from the sale. This reflects the increase in cash and the increase in revenue correctly.

Other options would misstate the effects: debiting revenue would reduce income and crediting cash would increase the liability or misstate the cash movement; debiting VAT implies a VAT amount exists when it doesn’t; debiting inventory would suggest you’re increasing inventory rather than recognizing the sale.