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 to calculate effective annual interest ratepresent value annuityutilization formula call centerbasic accounting equation exercisesjournal entry for sale of inventoryinventory turnover calculation formulamanufacturing overhead allocatedaccounts journal entries basicsinventory shrinkage journal entrycalculate rocefinal step in the accounting cycleprofit margin percentage calculatorincome statement with percentagesaccounting for goodwill journal entries10 steps of the accounting cyclemirr formuladirect write off method for uncollectible accountslifo perpetual vs periodicaccounting errors that do not affect the trial balancedouble entry bookkeeping examplereasons for material price varianceshrinkage accountingcompound depreciationexcel calculate margindeferred creditsgrowing annuity present valueabsorption costing equationthe present value of a perpetuitycreditors days calculation formulavouchers templatessuspenses accountpay dividends journal entryhow to calculate closing inventory accountinginventory spreadsheet examplejournal entries that bring accounts up to dateadjusting lower cost of market inventory on valuationprepaid adjusting entryhigh liquidity ratioa company that receives an interest bearing note receivable willsample cash receipt templateperiodic inventory methodthe entry to replenish a petty cash fund includesexcel irrannuity calculator excelliquidity acid test ratioaccrual and deferral accountingannuity cash flows calculatorthe times interest earned ratio is computed by dividingdebtor ledgeraccounting two column journaldiscounting promissory notesonline apportionment calculatorstep by step bookkeepingpresent value of increasing annuityjournalizing accounting examplecash received receipt templatejournal entry prepaid expenseapplied overhead rate formulaoperating lease accounting entriesbalance sheet stockholders equitypetty cash claim formcreditor definition accountingleverage ratios examplesdebit credit accounting cheat sheethow to compute ending inventoryis finished goods a current assetwhat does freight fob meangeneral ledger excelaccruals and deferred incomepresent value of a perpetuity formularemittance advice chequerepayment of premium bondstotal asset turnover formulafinancial statement projections templateoperative leverage