In this blog post we provide the information related to the Journal Entries for Accounts Receivables. Account receivables become a significant current asset when your business sells products on credit.

Essentially, when we sell goods on credit, we create accounts for our buyers. The sum total of these accounts becomes what we refer to as ‘account receivables.’

In simple terms, account receivables are used to record sales made ‘on account,’ meaning that a sale has occurred, but payment hasn’t been collected yet.

Here are the primary journal entries related to account receivables:

WHEN GOODS ARE SOLD ON CREDIT

Debit Account Receivables or Debtor Account

Credit Sales Account

WHEN PAYMENT IS RECEIVED FROM ACCOUNT RECEIVABLES

Debit Bank Account

Credit Account Receivables or Debtor Account

WHEN ACCOUNT RECEIVABLES ARE CONVERTED INTO BILL RECEIVABLES

Debit Bill Receivable Account

Credit Account Receivables or Debtor Account

WHEN SOME CUSTOMERS DEFAULT ON PAYMENTS AND THEIR ACCOUNTS ARE WRITTEN OFF

Debit Bad Debt Account

Credit Account Receivable Account

WHEN A CUSTOMER PREVIOUSLY CONSIDERED BAD SETTLES THEIR DEBT, ESSENTIALLY RECOVERING THE BAD DEBT

Debit Bank Account

Credit Bad Debts Recovered from Particular Debtor Account

(Specific name of the client)

WHEN YOU ACCEPT PAYMENTS VIA CREDIT CARD

This implies that you are receiving money through your customer’s credit card. Let me explain with a simple example:

Reliance Mobile Company’s online site accepts credit cards. Let’s say they recharge Rs. 100,000 through a credit card, and the credit card company charges a 5% fee. Here are the journal entries for this transaction:

a) When Reliance Company receives cash immediately from the bank after submitting the sales invoice:

Debit Cash Account: Rs. 100,000

Debit Credit Card Charges: Rs. 5,000

Credit Sales Account: Rs. 105,000

b) When Reliance Company has to wait after submitting the sales invoice to the bank:

The entry on the date of sale:

Debit Account Receivable Account: Rs. 105,000

Credit Sales Account: Rs. 105,000

The entry on the date that Reliance Company receives the cash:

Debit Cash Account: Rs. 100,000

Debit Credit Card Charges Account: Rs. 5,000

Credit Account Receivables Account: Rs. 105,000

JOURNAL ENTRIES WITH EXAMPLES

JOURNAL ENTRIES FOR ACCOUNTS RECEIVABLE CONCLUSION

Dear readers by reading above article you got good information related to the Journal Entries for Accounts Receivable. If you have any queries kindly comment below.

JOURNAL ENTRIES FOR ACCOUNTS RECEIVABLES