What is accounts receivable?
Accounts receivable is the balance owed to the entity by its customers in respect of sale of goods and services on credit.
Accounting for Receivables
As credit sale results in increase in the income (sale revenue) and assets (receivable) of the entity, assets must be debited whereas income must be credited.
In case of a credit sale, the following double entry is recorded:
|Credit||Sales Revenue (Income Statement)|
The double entry is same as in the case of a cash sale, except that a different asset account is debited (i.e. receivable).
When the receivable pays his due, the receivable balance will have be reduced to nil. The following double entry is recorded: