Accounts Receivable

Introduction to Accounts Receivable

Accounts receivable are amounts which are owed to a business by its customers for goods and services supplied to them on credit terms, they are sometimes referred to as trade debtors.

When you allow your customer credit and invoice them for a product or service and receive payment at a later date 45 days 90 days etc, then while they owe you the money they are classified as an account receivable.

Accounts receivable are recorded in the balance sheet of the business under the heading current assets, which means they are convertible into cash within a year.

Accounts Receivable Formula

The accounts receivable formula below reconciles the beginning and ending accounts receivable balances based on the credit sales and the cash collections for the accounting period.

Ending accounts receivables = Beginning accounts receivables + Credit sales – Cash collections

Accounts Receivable Journal Entry

Account Receivable are normally first recorded in the Sales Ledger which contains a personal account for each customer. In this way a listing of the sales ledger accounts will give you a listing of outstanding accounts receivable.

If for example, sales are made on credit to Customer A for 200 and Customer B for 400 the first entry would be to the sales day book to record the sales.

Sales Day Book – to record the sales
Sales Day Book Page 1
Date Customer Invoice Page Amount
8th January 2015 Customer A Invoice 123 Page 4 200
9th January 2015 Customer B Invoice 456 Page 7 400
Total Sales 600

The next entry would be to the Sales Ledger to record the accounts receivable to the personal accounts of each customer.

Sales Ledger – to record the Accounts Receivable
Customer A Page 4
Date Account Page Debit Credit
8th January 2015 Sales SDB 1 200
Customer B Page 7
9th January 2015 Sales SDB 1 400
Accounts Receivable 600

Finally the double entry posting would be the total from the sales day book and the sales ledger.

Double entry posting to the accounts receivable control account
Account Debit Credit
Accounts Receivable Control Account 600
Revenue 600
Total 600 600
Accounts Receivable November 6th, 2016Team

You May Also Like

Related pages

how do i calculate retained earningsloan amortization uksimple accounting spreadsheethow to prepare petty cash voucherdebit note definition in accountingoverhead expense allocationjournal entries quizwhat is aged trial balancedeferred inventory methodcalculate perpetuityhow to calculate total assets turnovercalculating reducing balance depreciationdeferred revenue in balance sheetlegal timesheet templatethe degree of operating leverage is computed asoverhead volume variance formulaweighted average cost accountingannuity factor tablehigh asset turnover ratiobank reconciliation statement samplecalculate contribution margin percentagefifo method calculationbookkeeping expensesasset retirement obligation journal entry exampledeferred income double entrylifo reserve journal entryformula for manufacturing overheadamortization schedule rule of 78net present value calculator annuityaccounting transaction analysisreturn on capital employed ratio formulajournal entry for insurance premiumhow to calculate perpetuityprepaid insurance journal entry examplejournal entry for advertising expensejournal entry unearned revenuegp percentage formulastraight-line method of depreciation calculatorhow to calculate annuity paymentstreatment of deferred tax in cash flow statementaccruals journal entrytrial balance adjusting entriesthe entry to replenish a petty cash fund includeshow to do adjusting journal entrieshow to calculate ending inventory using average costcalculate reorder pointhow to calculate lifoannuity excel formulacollection of accounts receivable journal entrypv of a lump sumadjusting entries worksheetexample of adjusting journal entriesaccounts receivables factoringaccumulated depreciation appears on thedeferred tax explaineddefinition of notes receivableaccounts payable adjusting entrydiscount factor table excelreturn on capital employed analysishow to calculate cost of ending inventorycalculating debtor daysoperating lease calculatorjournal entry for contingent liabilityfreight collect fobnominal annual rate of return formulacalculate accounts receivable turnover200 declining balance methodeffective interest amortization methodaccounting ledger excelfinancial forecast template exceltraditional costing formulaannual depreciation straight line methodformula for reducing balance depreciationexcel function pmt