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.
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:
Click the blue buttons to download them.
Do you use MS Excel? Check out our Accounts Receivable Ledger in Excel
These are the how-to steps : See further down this page for the examples
The Accounts Receivable Detail form is the first example and it shows four customers and their total amount owing at 30 June.
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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