Page 155 - F3 -FA Integrated Workbook STUDENT 2018-19

Receivables

Receivables

1.1 Cash and credit sales

If a cash sale has been made, the customer pays for the goods immediately at the
point of sale. The double-entry to record the transaction 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 concept 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 credit 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

Often, within the double-entry accounting system, a single total or control account is
maintained of all amounts due from credit customers (referred to as a trade
receivables’ control account) with a separate memorandum record maintained of
amounts due from individual credit customers (referred to as a trade receivables’
ledger).

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