Accounts Receivable Journal Entries With Example In Accounting
Here we discuss about Accounts Receivable Journal Entries, Previously we discuss about Prepaid Rent Journal Entry in detail.
Accounts Receivable Definition
What is Accounts Receivable?
From the point view of business, Accounts Receivable or Debtors are the customers to whom the Entrepreneur sold goods on credit basis for a specified period of time. Accounts Receivable
are Current Assets for the business because we will get benefit from Customers in the form of payments against the goods sold to them on credit basis.
Debtors / Accounts Receivable Accounting Journal Entries
1. Accounts Receivable First Main Journal Entry That Creates Accounts Receivable
When the company sold goods of Rs. 30000 to a Customer (A) on Credit Basis. The following Accounting Journal Entry is passed in the book of the Company:
Mr. A 30000
Sales a/c 30000
(Sold Goods On Credit To Mr. A For Rs. 30000)
2. When goods returned due to unsatisfactory conditions or not according to needs of the customers.
For Example, we suppose the Mr. A returned the goods worth Rs. 1000 due to his Unsatisfaction, then the following Accounting Journal Entry is passed in the book of company:
Sales Return a/c 1000
Mr. A 1000
(Goods Worth Rs. 1000 Returned To Customers Due To His Unsatisfaction)
3. When the company gives Sales Discount To customers as they make prompt payment before the due date, then the company may give Sales Discount to Customer on the total payment of goods or services sold.
For Example, the company gives 5% Sales Discount to its customer, Mr. A of total payment Rs. 300000, then sales discount = 300000 X 5% = Rs. 15000.
In this case, when the payment is made by Mr. A we record the following Accounting Journal Entry in the book of Company:
Cash a /c 285000
Sales Discount a/c 15000
Mr. A 3000000
(Cash Received From Mr. A at a Sales Discount Before Due Date)
This Sales Discount is an Expense for the company, so it will reduces the profits but ultimately satisfy the customer and hence more sales is expected in future.
4. When Payment Received From Loyal Customers who make prompt payment on time.
Suppose, the Customer, Mr. A makes payment on time and in this case he makes payment of Rs. 29000 on time, then following Accounting Journal Entry is passed in the book of Company:
Cash a/c 29000
Mr. A 29000
(Cash Received From Customer (Mr. A) For Rs. 29000)
5. When Disloyal Customers fail to make payment on time and such Credit or Debt given to them become Bad Debts.
For example, if the Customer Mr. B who is also the customer of company bought products from company failed to make payment on time, then following Accounting Journal Entry is passed
in the book of Company:
Bad Debts a/c 2500
Mr. B 2500
(Bad Debts on Goods Sold For Rs. 2500)
We also make a provision on Debts given to our customers. This is just an estimation on the debts and it is deducted from Closing Accounts Receivable in Balance Sheet order to get the
complete true value after deducting some sort of doubtful debts.
We make accounts for Provision for Doubtful Debts and Doubtful Debts And finally get the closing value of provision for Doubtful Debts. To learn more about Provision For Doubtful Debts
and Doubtful Debts, you can read “Adjustments in Final Accounts”.
Suppose, Accounts Receivable is Rs. 300000 and we make a provision of 3% on it value in order to get possible true value of Accounts Receivable, then Provision For Doubtful Debts is
Rs. 300000 x 3% = Rs. 9000. We deduct this amount from Accounts Receivable in Balance Sheet. So Remaining Amount of Accounts Receivable is Rs. 291000.
So, Accounts Receivable is the amount receivable from customers to the company for the goods sold on Credit Basis. Also, we discuss about Accounts Receivable Accounting Journal Entries
in The Light of International Accounting Standards.
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