Accounts receivable (AR) is an important part of almost every small business. Even cash retail businesses normally accept credit cards, which is considered a receivable. AR is any product or service sale on account where cash (checks are considered cash) is not immediately received, including debit and credit cards.
Even though using bookkeeping software will help with the daily use of accounting functions for a small business, it’s still important to have an understanding of the basic functions of accounting. Before learning how accounts receivable is posted to the journals, it’s important to understand the functions of debits and credits. Understanding how debits and credits work is the first step into grasping the fundamentals of accounting.
Posting Accounts Receivable to the Sales Journal
Since accounts receivable is an asset of the business, posting a debit is an increase and a credit is a decrease. Since a debit increases an asset, if a sale is made to a customer on open credit terms, the AR account is posted with a debit for the total amount that is owed on the invoice or sales receipt.
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