Difference between accounting entries in sale and purchase made Simple with Wafeq

Two invoices, one for a vendor purchase and the other for a client sale, were both marked “processed,” but the books weren’t balancing. A single misposted entry had thrown off the month-end close, and the team was now scrambling to find the error. Sound familiar? For many finance professionals, this is a daily reality, where a single journal entry, placed in the wrong account or at the wrong time, can create a ripple effect across the entire financial system.

That’s why mastering accounting entries is not just a technical skill, it’s the basis of every company’s financial clarity, compliance, and decision-making. This guide is a comprehensive, bilingual walkthrough of how to record sales and purchase transactions correctly and how platforms like Wafeq can simplify the process.

What is an Accounting Entry? And How Does it Work?

Before diving into the mechanics of sales and purchase entries, it’s essential to understand the foundation: the accounting entry itself.

An accounting entry, also known as a journal entry, is a formal record that captures every financial transaction a company makes. It ensures that the company's books remain accurate, balanced, and compliant with financial reporting standards. Each entry is based on the double-entry accounting system, where every transaction affects at least two accounts: one debit and one credit.

• Debit (Dr): Represents an increase in assets or expenses, or a decrease in liabilities or equity.
• Credit (Cr): Represents a decrease in assets or expenses, or an increase in liabilities or equity. For example, if your company buys office supplies in cash: Debit: Office Supplies (an expense) Credit: Cash (an asset)

A well-documented entry is timestamped, has a clear description, includes the accounts affected, and, when needed, references a related document such as an invoice or receipt.

How to Record a Purchase Entry – Step-by-Step

Every purchase your company makes, whether it's office supplies, raw materials, or services, must be recorded accurately in your books. The way you record the purchase depends on two key factors:

• Method of payment (cash or credit)
• Type of item purchased: inventory, expense, or fixed asset.
• Additionally, in Saudi Arabia, purchases usually include Value Added Tax (VAT), which also needs to be accounted for.

Common Purchase Entry Components:

• Expense or Inventory Account (Dr) represents what the company is receiving.
• VAT Input Account (Dr) reflects the recoverable tax paid on purchases.
• Cash or Accounts Payable (Cr) reflects the cash outflow or liability to the supplier.



How to Record a Sales Entry – Step-by-Step

Recording sales accurately is crucial for understanding revenue, tax obligations, and profit margins. Like purchases, sales entries vary depending on whether the transaction is cash or credit, and whether VAT applies or not. In Saudi Arabia, most business-to-business (B2B) and business-to-consumer (B2C) sales include 15% VAT, which must be collected and remitted to ZATCA later.

Common Sales Entry Components:

• Accounts Receivable or Cash (Dr) represents the inflow of money or the amount owed by the customer.
• Sales Revenue (Cr) reflects the income generated from the sale.
• VAT Output Account (Cr) reflects the tax collected on behalf of the government.

Recording Sales in the Perpetual Inventory System

In businesses that use the perpetual inventory system, every sale not only affects revenue but also triggers an update in the cost of goods sold (COGS) and inventory balances. Unlike the periodic system, where inventory updates happen at the end of the period, the perpetual system reflects inventory movement in real-time. When recording a sale under the perpetual system, a dual journal entry for each is required, like two sets of entries. This is to provide real-time gross profit data, improve accuracy in inventory reporting, and ensure compliance with audit and IFRS requirements.





Best Practices for Sales Entries:

• Always issue a tax invoice for B2B sales.
• Record VAT Output properly for accurate tax filing.
• Separate revenue types (products vs. services) for better reporting.
• Align recorded revenue with the delivery date or performance in accrual-based accounting.

How Wafeq Simplifies Accounting Entries in Saudi Arabia

Manual journal entries are prone to errors, especially with the complexity of VAT, inventory tracking, and real-time reporting. Wafeq transforms this process into a streamlined, automated experience while maintaining full control and transparency.

1. Automated Journal Entries for Invoices Every time you create a sales or purchase invoice in Wafeq, the platform automatically posts the appropriate double-entry journal. You no longer need to debit and credit accounts manually.
2. Built-In Saudi VAT Handling Wafeq is fully compliant with ZATCA VAT regulations. Automatically calculates VAT at 15%, splits VAT from the base amount in each entry, supports reverse VAT for import purchases, and reflects VAT in reports for easy Fatoora filing.
3. Seamless Integration with E-Invoicing (Fatoora) Wafeq connects directly to the ZATCA e-invoicing portal, allowing Real-time invoice generation, digital signature clearance, QR code issuance, and compliant archiving of sales invoices. This ensures your sales entries are legally valid and digitally traceable.
4. Real-Time Inventory + COGS Entries Using the perpetual inventory system in Wafeq, the moment you issue a sales invoice, inventory levels decrease automatically, COGS is recorded in the background, and Gross profit insights are updated in real-time.
5. Custom Chart of Accounts & Controls Wafeq gives you the flexibility to use a pre-set Saudi chart of accounts or create your own, assign specific accounts to each product or vendor, define default accounts for revenue, expenses, discounts, and returns, and set approval workflows for high-value entries.
6. Error-Free Purchase Entries When you record a purchase invoice or expense, Wafeq automatically debits the correct expense or inventory account, applies VAT input at 15%, links purchase returns to the original invoice, and supports recurring purchases and prepaid expenses.
7. Reports That Match Your Journal Entries Each transaction in Wafeq is backed by a journal entry that feeds into the trial balance, general ledger, VAT returns, and P&L, and balance sheet.

Whether you’re recording a straightforward sale or handling complex returns, every accounting entry tells part of your company’s financial story. Mistakes in these entries can lead to inaccurate reports, compliance issues, or missed insights. That’s why understanding the logic behind each debit and credit is essential for every finance professional.

Also Read: Understanding Accounting Entries: A Comprehensive Guide.

Frequently Asked Questions (FAQs) about accounting entries

What is the difference between journal entries and adjusting entries?

Journal entries are the daily records of financial transactions, such as sales, purchases, payments, or receipts. These entries are recorded at the time the transaction occurs and are the foundation of the general ledger. Adjusting entries, on the other hand, are made at the end of an accounting period to update account balances before preparing financial statements. They account for accrued income, prepaid expenses, depreciation, and other period-end adjustments.

What is the difference between adjusting entries and closing entries?

Adjusting entries are made to ensure revenues and expenses are recorded in the correct accounting period. They update account balances to reflect actual financial activity up to the period's end. Closing entries, however, are made after the financial statements are prepared. Their purpose is to reset the balances of temporary accounts, such as revenues, expenses, and drawings, to zero, transferring their totals to retained earnings or capital.