When a business collects accounts receivable, it means that the customer has paid the amount owed for goods or services previously sold. To record the collection of accounts receivable, you must debit the cash account (because you are receiving the money) and credit the accounts receivable account (because the receivable is no longer owed).
Example 1: Collection of Accounts Receivable for $3,000
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09/06/2024 | Cash A/c Debit | 3,000 | |
| 09/06/2024 | To Accounts Receivable/Party A/c | 3,000 |
Explanation:
- Cash will debited because the business received $3,000 in payment.
- Accounts Receivable/Party will credited, as the outstanding balance is now settled.
Example 2: Collection of Accounts Receivable for $7,500
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09/06/2024 | Cash A/c Debit | 7,500 | |
| 09/06/2024 | To Accounts Receivable A/c | 7,500 |
Explanation:
- Cash will debited because the company received $7,500.
- Accounts receivable will be credited to reflect this amount has been paid and is no longer outstanding.
Example 3: Collection of Partial Payment of $2,000 from an Accounts Receivable Balance of $5,000
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09/06/2024 | Cash A/c Debit | 2,000 | |
| 09/06/2024 | To Accounts Receivable A/c | 2,000 |
Explanation:
- Cash will debited for the amount collected ($2,000).
- Accounts receivable will be credited for the amount paid by the customer, reducing the outstanding balance.
Example 4: Full Collection of an Outstanding $10,000
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09/06/2024 | Cash A/c Debit | 10,000 | |
| 09/06/2024 | To Accounts Receivable A/c | 10,000 |
Explanation:
- Cash will debited because the business received $10,000.
- Accounts Receivable will be credited, reducing the customer’s outstanding debt.
- Every example shows how you would record the collection of accounts receivable in your accounting system, ensuring cash balances increase and the accounts receivable balance decreases accordingly.