{"id":5055,"date":"2014-09-26T06:18:04","date_gmt":"2014-09-26T04:18:04","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=5055"},"modified":"2014-09-21T06:18:45","modified_gmt":"2014-09-21T04:18:45","slug":"recognizing-collection-of-receivables","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/recognizing-collection-of-receivables\/","title":{"rendered":"Recognizing collection of receivables"},"content":{"rendered":"

It\u2019s one thing to recognize a sales receivable (note that it\u2019s yet to be received) and another to account for the actual collection (received this \u201csomething to be received\u201d. That\u2019s what makes me most happy \u2013 its real money received and an asset the company can use for either buying new goods, make investments or pay salaries. In my personal opinion collecting receivables should be number one priority in every company.\u00a0<\/p>\n

So how would one account for the collection? It\u2019s important to realize that this entry only affects your company\u2019s assets and nothing else (unless you\u2019ve given say a cash discount). A simple, straightforward receivables collection affects only two accounting lines \u2013 cash and receivable balances. Let me show you.<\/p>\n

Let\u2019s presume that we\u2019ve now collected to receivable we previously recognized in the amount of 1,000. On one hand we must show that we gained money, so that\u2019s the debit side of the entry. With the credit we\u2019re reflecting the decrease in receivables that we now collected and as such they\u2019re no longer outstanding:<\/p>\n\n\n\n\n\n
#<\/strong><\/td>\nDebit-Credit<\/strong><\/td>\nAccount name<\/strong><\/td>\nAmount<\/strong><\/td>\n<\/tr>\n
1<\/em><\/td>\nDebit<\/em><\/td>\nCash and cash equivalents<\/em><\/td>\n1,000<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nAccount receivables<\/em><\/td>\n1,000<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Should our client pay in parts, say 60% today and 40% in a week or so, we\u2019re recognizing the collection also in parts \u2013 60% with the first entry and 40% with the second one thus closing also the receivable balance:<\/p>\n\n\n\n\n\n\n\n
#<\/strong><\/td>\nDebit-Credit<\/strong><\/td>\nAccount name<\/strong><\/td>\nAmount<\/strong><\/td>\n<\/tr>\n
1<\/em><\/td>\nDebit<\/em><\/td>\nCash and cash equivalents<\/em><\/td>\n600<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nAccount receivables<\/em><\/td>\n600<\/em><\/td>\n<\/tr>\n
2<\/em><\/td>\nDebit<\/em><\/td>\nCash and cash equivalents<\/em><\/td>\n400<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nAccount receivables<\/em><\/td>\n400<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

It\u2019s important to remember recognizing customer payments as they happen since they reflect on the actual amounts of money you\u2019ve got to use.<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s one thing to recognize a sales receivable (note that it\u2019s yet to be received) and another to account for the actual collection (received this \u201csomething to be received\u201d. That\u2019s what makes me most happy \u2013 its real money received and an asset the company can use for either buying new goods, make investments or […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[69],"tags":[],"class_list":["post-5055","post","type-post","status-publish","format-standard","hentry","category-1-17-accounts-receivable"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5055","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=5055"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5055\/revisions"}],"predecessor-version":[{"id":5056,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5055\/revisions\/5056"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=5055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=5055"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=5055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}