Accounts Receivable
Definition: Amounts owed by customers for credit sales
Scope:BroadDifficulty:Easy
Amounts owed by customers for credit sales
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record a credit sale | ||
| Sell $4,800 of merchandise on account. | ||
| Accounts ReceivableAsset+ | $4,800 | |
| Sales RevenueRevenue+ | $4,800 | |
| A/R increases (asset up), revenue recognized at point of sale. | ||
| 2. Collect payment in full | ||
| Customer pays the $4,800 balance within credit terms. | ||
| CashAsset+ | $4,800 | |
| Accounts ReceivableAsset− | $4,800 | |
| Cash increases, A/R decreases. Total assets unchanged. | ||
| 3. Collect with discount (2/10, n/30) | ||
| Customer pays within 10 days; 2% discount = $96. | ||
| CashAsset+ | $4,704 | |
| Sales DiscountsContra Revenue+ | $96 | |
| Accounts ReceivableAsset− | $4,800 | |
| Sales Discounts is a contra-revenue account. | ||
| 4. Customer returns merchandise | ||
| Customer returns $600 of goods sold on account. | ||
| Sales Returns & AllowancesContra Revenue+ | $600 | |
| Accounts ReceivableAsset− | $600 | |
| Contra-revenue increases, A/R decreases. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Accounts ReceivableAsset account — amounts owed by customers. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$4,800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,800.00
$4,800.00
$600.00
$5,400.00
Sales RevenueRevenue account — income from selling goods or services. Credits increase the balance. Debits decrease the balance.RevenueIncome earned from business operations. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,800.00
Normal bal. ▶
$4,800.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$4,800.00
$4,704.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$9,504.00
Sales DiscountsSales DiscountsExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$96.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$96.00
Sales Returns & AllowancesSales Returns & AllowancesExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$600.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$600.00
DurationShort-Term
Related Accounting Types
- Financial Accounting(Primary)
- Auditing(Secondary)
- Forensic Accounting(Tangential)
Related Reports
- Balance Sheet(Primary — Current asset line)
- Form 10-K Annual Report(Primary — Disclosed in notes)
- Aged Accounts Receivable Report(Primary — Detail by aging bucket)
Related Subjects
External Links
- Accounts receivable — Wikipedia