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Sample daily journal entries

14 common scenarios in a Saudi trading business, with figures and 15% VAT. Every entry is balanced.

Cash sale with VAT

The main branch sold goods for cash for 10,000 SAR before VAT. 15% VAT (1,500 SAR) was added, so the cash box received 11,500 SAR.

AccountDebitCredit
From / Main branch cash - Riyadh11,500.00
To / Cash sales - Main branch10,000.00
To / VAT - Output1,500.00
Total11,500.0011,500.00
Revenue is recorded net of VAT; the VAT collected is a liability to ZATCA, not revenue. The consumer invoice here is a simplified invoice reported to FATOORA within 24 hours.

Credit sale to a business customer

The company sold goods on credit to a business for 20,000 SAR before VAT. A tax invoice was issued for a total of 23,000 SAR including 3,000 SAR VAT, payable within 30 days.

AccountDebitCredit
From / Trade customers23,000.00
To / Credit sales20,000.00
To / VAT - Output3,000.00
Total23,000.0023,000.00
Output VAT is due on the invoice issue date, not the collection date, so it is included in that period's return even if the customer has not paid yet. An invoice between two businesses requires prior clearance from the platform before it is delivered.

Collection from a credit customer

The business customer transferred 15,000 SAR to the bank account against its outstanding balance of 23,000 SAR, leaving a balance of 8,000 SAR.

AccountDebitCredit
From / Bank (1) - Current account15,000.00
To / Trade customers15,000.00
Total15,000.0015,000.00
Collection does not affect revenue or VAT because both were recorded at the time of sale; it simply converts one asset (a receivable) into another (cash). Apply the amount to the oldest invoices first so debt aging stays accurate.

Credit purchase of goods with input VAT

The company bought goods for the main warehouse from a local supplier for 40,000 SAR before VAT. VAT was 6,000 SAR and the invoice total was 46,000 SAR, on credit.

AccountDebitCredit
From / Inventory - Main warehouse, Riyadh40,000.00
From / VAT - Input6,000.00
To / Local suppliers46,000.00
Total46,000.0046,000.00
Deductible input VAT is not included in inventory cost; it is recorded in a separate account that is deducted from output VAT in the return. Deduction requires a valid tax invoice in the business's name showing its VAT number.

Return of credit sales

A customer returned goods bought on credit worth 2,000 SAR before VAT (2,300 SAR including VAT). The cost of the returned goods is 1,400 SAR, and they were returned to warehouse inventory.

AccountDebitCredit
From / Sales returns2,000.00
From / VAT - Output300.00
To / Trade customers2,300.00
From / Inventory - Main warehouse, Riyadh1,400.00
To / Cost of goods sold - Main branch1,400.00
Total3,700.003,700.00
An electronic credit note linked to the original invoice must be issued before output VAT can be reduced. Under the perpetual inventory system, the cost entry is also reversed to return the goods to inventory.

Discount allowed for early payment

A customer owing 11,500 SAR (10,000 + 1,500 VAT) paid early and was granted a 5% discount of 500 SAR plus 75 SAR VAT under a credit note. The customer transferred the net 10,925 SAR.

AccountDebitCredit
From / Bank (1) - Current account10,925.00
From / Discounts allowed500.00
From / VAT - Output75.00
To / Trade customers11,500.00
Total11,500.0011,500.00
A post-sale discount reduces the value of the supply, so output VAT decreases, provided a credit note is issued. A discount stated on the invoice itself is deducted before VAT is calculated and needs no separate entry.

Paying monthly salaries

Total salaries were 40,500 SAR (basic 30,000, housing 7,500 and transportation 3,000). Deductions were 1,800 SAR for the employees' GOSI share and 1,000 SAR for an advance installment, and the net 37,700 SAR was paid. The employer's GOSI share of 2,400 SAR was also recorded (illustrative figures).

AccountDebitCredit
From / Basic salaries30,000.00
From / Housing allowance7,500.00
From / Transportation allowance3,000.00
From / GOSI - Employer share2,400.00
To / GOSI payable4,200.00
To / Employee advances1,000.00
To / Bank (1) - Payroll account37,700.00
Total42,900.0042,900.00
Calculate GOSI contribution rates from the General Organization for Social Insurance data based on the employee's nationality and the insurance branches; the figures here are for illustration only. The accrued GOSI balance is paid later with a separate entry.

Prepaid rent and its monthly adjustment

The company paid one year's rent for a commercial showroom in advance: 60,000 SAR + 9,000 SAR VAT, recorded in the prepaid rent account. At the end of each month, 5,000 SAR (60,000 ÷ 12) is charged to expenses.

AccountDebitCredit
From / Rent5,000.00
To / Prepaid rent5,000.00
Total5,000.005,000.00
Initial payment entry: Dr Prepaid rent 60,000 and Dr VAT - Input 9,000, Cr Bank 69,000; the adjustment entry above then repeats for 12 months. Rent on commercial shops is subject to VAT, unlike residential rent. A contract of one year or less can be treated as a short-term lease, while longer contracts are usually treated as a right-of-use asset and a lease liability under IFRS 16.

Monthly depreciation of a delivery vehicle

The company bought a delivery vehicle for 120,000 SAR with a useful life of 5 years and no salvage value, depreciated using the straight-line method. Annual depreciation is 24,000 SAR and monthly depreciation is 2,000 SAR.

AccountDebitCredit
From / Depreciation - Vehicles2,000.00
To / Accumulated depreciation - Vehicles2,000.00
Total2,000.002,000.00
The asset account itself is not reduced; an accumulated depreciation account is used so the books keep both the original cost and the book value (120,000 − accumulated depreciation). Review the useful life and residual value at the end of each year.

Adjusting an inventory shortage at a showroom

A physical count at the Jeddah showroom found goods costing 83,800 SAR, while the book balance is 85,000 SAR. The 1,200 SAR shortage was recorded at cost after the stocktake committee approved it.

AccountDebitCredit
From / Inventory shortage1,200.00
To / Inventory - Jeddah showroom1,200.00
Total1,200.001,200.00
The shortage is valued at cost, not at selling price. Find the cause before posting: data entry errors, unrecorded transfers or damage. If an employee is proven responsible, charge it to their account instead of to expenses. Consult your tax advisor on how to treat unexplained losses.

Settling and paying VAT to ZATCA

At quarter-end, output VAT was 48,000 SAR and input VAT 31,500 SAR, so the net due to ZATCA is 16,500 SAR. The return was filed and the amount paid from the bank before the end of the month following the quarter.

AccountDebitCredit
From / VAT - Output48,000.00
To / VAT - Input31,500.00
From / VAT - Settlement16,500.00
To / VAT - Settlement16,500.00
To / Bank (1) - Current account16,500.00
Total64,500.0064,500.00
The entry closes the output and input accounts into the settlement account and then pays its balance; it can be split into two entries: a closing entry when the return is filed and a payment entry when payment is made. If input VAT exceeds output VAT, the result is a debit balance that can be carried forward or refunded.

Zakat provision at year-end

The company's Zakat base (its owners are Saudi) was determined at 1,200,000 SAR on a Hijri Hawl basis. The estimated Zakat at 2.5% is 30,000 SAR.

AccountDebitCredit
From / Zakat expense30,000.00
To / Zakat provision30,000.00
Total30,000.0030,000.00
If the fiscal year is Gregorian, a rate of about 2.578% is used instead of 2.5%. The Zakat return is filed and paid within 120 days of year-end. On payment: Dr Zakat provision, Cr Bank. Any later assessment differences are treated in the year they arise.

Depositing branch cash into the bank

The Jeddah branch cashier deposited 35,000 SAR of cash sales receipts into the company's current account. The deposit appeared on the bank statement the same day.

AccountDebitCredit
From / Bank (1) - Current account35,000.00
To / Jeddah branch cash35,000.00
Total35,000.0035,000.00
A transfer between two cash accounts does not affect revenue or VAT. If the deposit appears late on the bank statement, use the cash in transit account as an intermediary so the bank reconciliation shows the correct balance.

Recording cost of goods sold under the perpetual inventory system

Against the 10,000 SAR cash sale at the main branch, the cost of the items sold at weighted average cost was 6,800 SAR. The entry is posted automatically with the sales invoice.

AccountDebitCredit
From / Cost of goods sold - Main branch6,800.00
To / Inventory - Main warehouse, Riyadh6,800.00
Total6,800.006,800.00
Under the perpetual inventory system, each sale has two entries: the revenue and VAT entry at the selling price, and the cost entry at cost. Gross profit here is 3,200 SAR, a 32% margin and a markup on cost of about 47%.