accounts receivable examples

Accounts receivable definition: amounts due the company on account from customers who have bought merchandise or received services. Accounts receivable are presented as a current asset in the balance sheet. This means accounts receivable arise when a business makes sales on credit. In such cases, the sales agreement calls for payment within a certain time period and may offer a discount for payment before the due date. Whether a general journal or a specialized journal such as sales journal is used, the journal entries for a credit sale and subsequent collection is shown in diagram.

accounts receivable examples 2

If a discount of 2% for payment within 10 days had been offered to Peter Tan, the entry of January 9 would be as shown below. A business may allow the return of merchandise by the customer for credit against their account. This is accomplished through the use of the sales returns and allowances account. For example, if the customer in the previous example, Peter Tan, returned merchandise for $100 credit prior to payment, accounts receivable would be adjusted through the entry shown in the next diagram.

accounts receivable examples 3

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