Whether you’re beginning your accounting career or already working with clients, understanding Accounts Receivable (AR) is vital. At HAUK Solutions (PVT) Ltd, our teams handle real UK accounting operations, and accuracy in recording receivables is key to building client trust.
Here’s a quick guide to the core journal entries you should know when dealing with receivables:
Recording a Credit Sale
When goods or services are sold on credit:
Dr. Accounts Receivable (Debtor) — XXX
Cr. Sales — XXX
Records income and establishes the customer’s outstanding balance.
Receiving Payment from Customer
When the customer pays the amount owed:
Dr. Cash/Bank — XXX
Cr. Accounts Receivable — XXX
Clears the receivable balance and increases your cash position.
Sales Return
If the customer returns goods:
Dr. Sales Return — XXX
Cr. Accounts Receivable — XXX
Reduces income and adjusts the customer’s balance.
Bad Debts Written Off
When payment is not recoverable:
Dr. Bad Debt Expense — XXX
Cr. Accounts Receivable — XXX
Recognizes the loss and removes the uncollectible amount.
Recovering a Previously Written-Off Debt
If a customer unexpectedly pays later:
Dr. Cash/Bank — XXX
Cr. Bad Debt Recovery (Income) — XXX
– Adds income for the recovered amount.
Pro Tip: Always reconcile your receivable ledger with the general ledger monthly. Consistency in follow-ups and reconciliation reflects professionalism and strengthens client relationships — something HAUK Solutions values deeply.
By mastering these entries, you’re not just improving your accounting skills — you’re preparing yourself for international exposure and excellence in a fast-paced professional environment.
