Accounts receivable

Change receivables to account receivables Accounts Receivable or usually oral promises to pay a company by a customer usually mature between 30 and 60 days. They are extremely important for operating cycle. Different company though all recognize in value account Receivable differently.The company with customers or Partners that are less reliable may need to expense differently due to risk. Recording the writing off on uncollected account requires to journal entries

Allowance for doubtful accounts

Accounts receivable

Your credit the account receivable because you’ve estimated that is most likely not to receive payment on that amount of purchase. To incentivize quick payment by your customers and partners you may implement a cash discount or a sales discount for companies to pay within 30 days. This is where the gross method and the net method come into play.Since there is a variable in how you recognize the counter so you’ll need to choose one or the other and be consistent with out your work.

Gross method versus net method Example:

Waiting for payment from a Customer for $5000 with terms 2% discount paid in 10 days while the rest is due within 30 days (n/30).

	Gross method sales
DR	Accounts Receivable	$5,000
CR	Sales revenue		$5,000
	$3000 paid before discount expires
DR	Cash	$2,940
DR	Sales discount	$60
CR	Accounts receivable		$3,000
	$1000 after the discount period
DR	Cash	$1,000
CR	Accounts Receivable		$1,000

	Net method
DR	Accounts receivable	$4,900
CR	Sales revenue		$4,900
	$3000 paid before discount expires
DR	Cash	$2,940
CR	Accounts Receivable		$2,940
	$1000 after the discount period
DR	Cash	$1,000
CR	Accounts Receivable		$960
CR	Sales discount forfeited		$40

Direct write off method for uncollected accounts

Allowance method for uncollectible accounts

Accounts receivable

See also