Sales of Scrap Journal Entry with Practical Examples (2026)
When a company sells scrap materials, it needs to record the transaction in its accounting records. Scrap materials are often the by-products or residuals of a manufacturing process that are no longer usable in their current form for production. The sale of these materials can generate additional revenue.
Table of contents:
1. Cash Sales of scrap to ABC Enterprise
2. When cash is received against Sales of scrap to ABC Enterprise
3. Cash Sales of wastage P P Bags to AR Enterprise
4. When cash is received against Sales of scrap to AR Enterprise
Let's Start with Practical Examples:
Voucher No. 01
Sales of scrap to ABC Enterprise:
|
Ledger Name |
Debit (TK) |
Credit (TK) |
Remarks |
|
ABC Enterprise -Advance Against sales
|
***** |
|
|
|
Sales TBR Scrap
|
|
***** |
|
|
Sales RTG Scrap
|
|
***** |
|
Narration:
Sales of scrap to ABC Enterprise
Voucher No. 02
When cash is received against Sales of scrap to ABC Enterprise:
|
Ledger Name |
Debit (TK) |
Credit (TK) |
Remarks |
|
Factory Petty cash
|
***** |
|
|
|
ABC Enterprise -Advance Against sales
|
|
***** |
|
Narration:
When cash is received against Sales of scrap to ABC Enterprise
Voucher No. 03
Cash Sales of wastage P P Bags to AR Enterprise:
|
Ledger Name |
Debit (TK) |
Credit (TK) |
Remarks |
|
AR- Enterprise -Advance Against sales
|
***** |
|
|
|
Sales of PP bags
|
|
***** |
|
Narration:
Cash Sales of wastage P P Bags to AR Enterprise
Voucher No. 04
When cash is received against Sales of scrap to AR enterprise:
|
Ledger Name |
Debit (TK) |
Credit (TK) |
Remarks |
|
Factory Petty Cash
|
***** |
|
|
|
AR- Enterprise -Advance Against sales
|
|
***** |
|
Narration:
When cash is received against Sales of scrap to AR Enterprise
Frequently Asked Questions(FAQS)
FAQ 1: What is the journal entry for sales of scrap?
The journal entry for sales of scrap depends on whether the payment is received immediately or on credit. For a cash sale, debit Cash/Bank and credit Scrap Sales Income. For a credit sale, debit Accounts Receivable and credit Scrap Sales Income.
FAQ 2: Is scrap sales an income or an expense?
Scrap sales are generally recorded as other operating income or scrap sales income, not as an expense. It increases the company's income and appears in the Income Statement according to the company's accounting policy.
FAQ 3: How do you record scrap sales with VAT?
When VAT applies, record the cash or receivable as the total amount collected, credit Scrap Sales Income for the sale value, and credit VAT Payable for the VAT portion. This keeps revenue and tax liability separate.
FAQ 4: Does scrap sales affect the financial statements?
Yes. Scrap sales increase income in the Income Statement and increase either Cash or Accounts Receivable in the Balance Sheet, improving overall financial reporting accuracy.