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Receivables

Receivables

1.1 Cash and credit sales

If a sale is for cash, the customer pays for the goods at the point of sale. The
double-entry to record the sale is:

Debit Cash/Bank

Credit Sales revenue

If the sale is on credit the customer will typically pay for the goods between 30-60
days after the sale. Application of the accruals requires that the sale is recorded
when the goods are delivered. The revenue is recorded along with a corresponding
asset that represents the customers’ commitment to pay. The asset is referred to as
a ‘receivable’. The double-entry to record the sale is:

Debit Receivables

Credit Sales revenue

When the customer subsequently makes payment the debt is cleared with the
following accounting entries:

Debit Cash/Bank

Credit Receivables

Tutor notes guidance – discussion points

Discuss the benefits & costs of offering credit facilities to customers.

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