The journal entry for accounts receivable records money customers owe for delivered goods or services. At sale time, debit Accounts Receivable and credit Sales Revenue. When payment arrives, debit Cash and credit Accounts Receivable.
What’s Happening with Accounts Receivable
Accounts receivable represents money owed to your business for delivered but unpaid goods or services.
You’ll find this asset on your balance sheet under Current Assets. It shows cash you expect to collect within a year. Say you finish a $2,000 service in May but bill the client in June—your AR jumps by $2,000 in May. When the payment lands in July, AR drops while Cash rises by the same amount. AccountingTools calls AR a key liquidity indicator, helping companies predict cash flow and evaluate credit risk. Checking your AR aging report—especially invoices over 30 days—can spot collection slowdowns before they hurt operations.
Step-by-Step Solution
To record accounts receivable transactions accurately, follow these steps in your accounting software.
- Record a Sale on Account
- Open your accounting software—maybe QuickBooks Online 2026 or Xero 2026.
- Head to + New > Invoice, fill in customer details, the service or product, and the amount ($2,000 for consulting).
- Save the invoice. The system automatically posts this journal entry:
Account Debit Credit Accounts Receivable 2,000 Sales Revenue 2,000
- Receive Payment
- When payment arrives, go to + New > Receive Payment, pick the customer and invoice, and enter the amount ($2,000).
- Choose how they paid—bank transfer, check, whatever. The software posts:
Account Debit Credit Cash 2,000 Accounts Receivable 2,000
- Record Uncollectible Accounts
- If a customer ghosts you, use the allowance method. Debit Bad Debt Expense and credit Allowance for Doubtful Accounts (say, $300 on a $2,000 invoice).
- Later, when you’re sure the debt’s dead, debit Allowance for Doubtful Accounts and credit Accounts Receivable.
