Cash on Delivery Journal Entry

Cash on delivery, or COD, is a type of payment method in which the buyer pays for a good or service at the time of delivery. This payment method is often used for online purchases, as it offers buyers protection from fraud. With COD, the buyer does not have to worry about making a payment before receiving the item, as they would with a traditional online purchase.

COD can also be used for purchases made by people, such as at a store or market. In this case, the buyer hands over the cash to the seller at the time of delivery. COD is a convenient payment method for buyers, as it allows them to receive their purchase before making a payment. However, it is important to note that COD can also be risky for sellers, as there is always the possibility that the buyer will refuse to pay. For this reason, sellers often charge a higher price for items when using COD as a payment method.

The cash-on-delivery (COD) option is a convenient way to make online purchases, but it also comes with some risks. By not requiring payment upfront, the buyer is essentially trusting the seller to deliver the goods as promised. If the seller fails to do so, the buyer may have to go through the hassle of getting a refund.

Additionally, COD can also be more expensive than other payment methods, as sellers often charge a surcharge for this service. However, despite these risks, COD remains a popular payment method, especially in developing countries where trust is often an issue. For many buyers, the convenience and peace of mind that comes with COD outweigh the potential downside.

The cash on delivery will not require the company to record accrued expenses or even accounts payable. The company will record cash paid when the items are received. It is not impacted by the other accounts.

Journal Entry for Cash on Delivery

The company will only record cash paid when receiving items from the seller. They are not required to record accounts payable as the purchased items and cash payment happen at the same time.

The purchase items can be classified as inventory or fixed assets depending on the nature of the purchase.

The journal entry is debiting expanse/assets and credit cash.

If the items meet the definition of expense, they will appear on the income statement depending on the expense category.

If the items are assets, they will appear on the balance sheet in the classification of the current or fixed asset.

The supplier requires immediate payments, so the company has to record cash credit.

Example

Company ABC has placed the other of some furniture from the supplier. The total purchase amount $ 5,000 and the supplier require to make cash payments on delivery. The company has received the furniture and made payment as promised. Please prepare journal entry for cash on delivery.

The company makes payment when receiving the furniture from the supplier. They have to recognize the fixed assets on the balance sheet and record cash paid.

The journal entry is debiting fixed assets $ 5,000 and credit cash $ 5,000.