Introduction to Accounts Receivable in Accounting

Invoice

An invoice is a document that lists the products/services provided, along with the amount due.

Customer file

A customer file typically includes balance, credit limit, and name/address, but not the customer's tax bracket.

Sales account transaction

When a customer pays immediately, cash is received (debit), and sales revenue is recognized (credit).

Accounts receivable

Accounts receivable is the amount owed by customers for goods/services purchased on credit.

Control account

A control account summarizes the totals of subsidiary ledger transactions, such as accounts receivable.

Sales invoice

A sales invoice confirms the sale and details the goods/services provided.

Sales invoice (bill)

A sales invoice is issued to the customer after the sale, requesting payment.

Sales Returns and Allowances transaction

Sales Returns and Allowances is debited to reduce revenue, and Accounts Receivable is credited to reduce the amount owed by the customer.

Sales order contents

A sales order includes unit price, company name, and invoice number, but not the buyer's Social Security number.

Credit sale transaction

Accounts Receivable is debited to record the amount owed, and Sales is credited to recognize revenue.

Uncollectible accounts

Bad debt refers to amounts owed that are unlikely to be collected.

Contra account

A contra account has a balance opposite to its related account, e.g., Allowance for Doubtful Accounts is a contra account to Accounts Receivable.

Cash account

Debited to record the payment.

Accounts receivable account

Credited to reduce the amount owed.

Direct charge-off method

Also known as the direct write-off approach.

Bad debts expense account

Debited to record the loss for uncollectible accounts.

Accounts receivable

Represents amounts owed by customers for credit purchases.

Control account

Summarizes subsidiary ledger transactions.

Sales return

Occurs when a customer returns goods purchased on credit.

Accounts receivable account (debit)

Debited to record the amount owed when a customer buys on credit.

Sales account

Credited to recognize revenue when a customer buys on credit.

Cash flow statement

Shows how changes in balance sheet and income statement accounts affect cash.

Allowance of doubtful accounts

Debited when an account becomes uncollectible and is written off under the allowance method.

Schedule of accounts receivable

Lists all amounts owed by customers.

Allowance for doubtful accounts

A contra account that reduces the reported amount of Accounts Receivable.

Bad debts expense

Debited to write off the uncollectible amount under the direct write-off approach.