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Accounts Receivable Definition

Plus Free Printable Forms

Accounts Receivable definition : Accounts Receivable is the name of a bookkeeping account that holds the total of all unpaid sales invoices for a business. 

This account is found on the Balance Sheet under the Assets section and displays the total that is owed to the business by customers who are yet to pay their invoices.

Accounts Receivable Definition

Template and Forms Options
Accounts Receivable Definition

what is the best way to track all sales and payments?

Below is a step by step guide to show you.

We go through it from the time a sale is made on account to the time of payment, using examples so you can see how it works.

You can print off for free the blank forms which we used to produce the examples. 

These blank forms are great to use if you are keeping a manual bookkeeping system.

Although this is aimed at a manual bookkeeping system, reading through these steps will give you an idea of how it all works for automated accounting software, because it’s all the same. 

There are two printable forms in PDF format:

there are two printable forms in pDF format:

Click the blue buttons to download them.

Do you use MS Excel? Check out our Accounts Receivable Ledger in Excel

Step by Step : The Accounts Receivable System
Accounts Receivable Definition

These are the how-to steps : See further down this page for the examples

  1. Prepare your Sales Invoice and send to the customer.

  2. Go to the Sales Register form and write down the sale details. This register is used for all sales on account and cash sales.

  3. Now, on the Customer Ledger form that you downloaded above, write the date, invoice number and amount of invoice in the debit column.  

  4. Note: Use one Customer Ledger form per Customer. So, if you have 10 customers on account that you have issued invoices to, you should have 10 Customer Ledger pages. If you have made 5 sales invoices to one customer, there should be 5 invoices listed on that customer’s specific Customer Ledger form.

  5. Write the payment amount in the credit column when a customer pays you for an invoice, or when a credit is issued to that customer.

  6. The balance column will increase each time a sales invoice is issued to the customer, and the balance column will decrease each time a payment is received from a customer, or a credit is issued to them.

  7. On any given day that you want to know what your Customers owe you in total i.e. the total Accounts Receivable amount, go through each Customer Ledger that you have and write the total that each customer owes you onto the Accounts Receivable Details form that you downloaded above – one Customer per row.  

  8. You should do this on the last day of every month as a regular month end action and keep it with your other reports. Your tax accountant will want one of these completed forms at the end of the financial year – it needs to be calculated and dated the last day of your financial year.

  9. Add up all the rows, which will give you the total Accounts Receivable amount. Yay! Now you know how much your customers owe you.

  10. At the start of the new financial year, start a new Customer Ledger for each customer. Bring forward their closing balance from the previous year and add it as the opening balance for this new year.

  11. How to file all this paperwork? Open a file and call it Accounts Receivable. File the Customer Ledger forms into the folder in alphabetical order.

  12. Open another section, either in front of the Customer Ledger forms or behind, where you can keep your completed Accounts Receivable forms.

Template and Forms examples
Accounts Receivable Definition

The Accounts Receivable Detail form is the first example and it shows four customers and their total amount owing at 30 June. 

Accounts Receivable Definition: Details Ledger

The next four examples are the Customer Ledger forms, one for each customer : it is the final balance from each Customer Ledger that is transferred to the Accounts Receivable details page in the image above.

See XYZ below : the final balance on June 21 is $860 : this has been transferred to the Accounts Receivable form above.

See ABC below : the final balance on June 21* is $460 : this has been transferred to the Accounts Receivable form above.

*Note: I just randomly chose this date of June 21, in real life there may well be sales right up to the last day of June.

See Second Hand Shop below : the final balance on 25 June* is $65 : this has been transferred to the Accounts Receivable form above.

See Fast Bikes below : the final balance on May 4 is $455 : this has been transferred to the Accounts Receivable form above.  There are old invoices from April that are unpaid, so your business should start accounts receivable collection procedures to get the money in as soon as possible because this will be negatively impacting your cash flow.


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