Accounts Receivable Journal Entry – Debit or Credit

Accounts receivable refers to the balance owed to an enterprise by their customers for the sale of goods and services on credit. An accounts receivable journal entry is passed to account for the credit sales as well as to create a debtors' account, otherwise known as accounts receivable, in the books.

In this article, we explain the important accounts receivable journal entries.

What are accounts receivable journal entries?

Accounts receivables or AR are assets in the seller’s books, as the customer owes the sum of money against such sale of goods and services. Accounts receivables or trade receivables are maintained debtor-wise allowing the business to manage their overdue sales and non-payments. 

Accounts receivables journal entries are crucial as they are the cornerstone of its finances. The journal entry for account receivables is made by debiting the accounts receivable account and crediting the sales account. 

Kinds of journal entries for accounts receivable

There might be several journal entries pertaining to different transactions. The basic and common journal entries relating to accounts receivables are shown below.

1.  Journal entry for credit sales

2.  Journal entry for cash received in full for credit sales

3.  Journal entry for cash received for credit sales after-sales discount

4. Journal entry for transferring sales discount to profit/loss account

5.  Journal entry recording credit sales as a bad debt – i.e. debt that cannot be recovered

6. Journal entry for transferring bad debt to profit/loss account

Are accounts receivable a debit or credit in the books of accounts?

Accounts receivable is the balance a company is owed from its debtors and is an asset for the company. The company will benefit from this asset in the future in the form of cash payments. Hence, like any asset, accounts receivable is a debit balance. It forms a part of the current assets on the asset side of the company’s balance sheet.