Receivables Accrual Accounting Entries
Receivables creates default accounts for revenue, receivable, freight, tax, unearned revenue, unbilled receivable, late charges, and AutoInvoice clearing (suspense) accounts using the information specified in the AutoAccounting structure and the subledger accounting rules.
You submit the Create Receivables Accounting process to create the accounting entries in Subledger Accounting.
The following sections describe the default accounting entries created when you enter transactions in Receivables using the Accrual method of accounting:
-
Invoices
-
Credit Memos and On-Account Credits
-
Receipts
-
Remittances
-
Adjustments
-
Debit Memos
-
Credit Card Refunds
Invoices
This section describes the default accounting entries for invoices.
When you enter a standard invoice, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Receivables |
None |
None |
Revenue |
None |
Tax (if you charge tax) |
None |
Freight (if you charge freight) |
If you enter an invoice with an In Arrears invoicing rule with a three-month fixed duration revenue scheduling rule, Receivables creates the following journal entries:
In the first period of the rule:
Debit |
Credit |
---|---|
Unbilled Receivables |
None |
None |
Revenue |
In the second period of the rule:
Debit |
Credit |
---|---|
Unbilled Receivables |
None |
None |
Revenue |
In the third and final period of the rule:
Debit |
Credit |
---|---|
Unbilled Receivables |
None |
None |
Revenue |
Receivables |
None |
None |
Unbilled Receivables |
None |
Tax (if you charge tax) |
None |
Freight (if you charge freight) |
If you enter an invoice with an In Advance invoicing rule, Receivables creates the following journal entries:
In the first period of the rule:
Debit |
Credit |
---|---|
Receivables |
None |
None |
Unearned Revenue |
None |
Tax (if you charge tax) |
None |
Freight (if you charge freight) |
Unearned Revenue |
None |
None |
Revenue |
In all periods of the rule for the portion recognized:
Debit |
Credit |
---|---|
Unearned Revenue |
None |
None |
Revenue |
Credit Memos and On-Account Credits
This section describes the default accounting entries for credit memos.
When you credit an invoice, debit memo, or chargeback, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Revenue |
None |
Tax (if you credit tax) |
None |
Freight (if you credit freight) |
None |
None |
Receivables (Credit Memo) |
Receivables (Credit Memo) |
None |
None |
Receivables (Invoice) |
When you enter a credit memo against an installment, you choose one of the following split term methods: LIFO, FIFO, Prorate. When you enter a credit memo against an invoice with invoicing and revenue scheduling rules, you choose one of the following revenue reversal rules: LIFO, Prorate, Unit.
If the Invoice Accounting Used for Credit Memos profile option is set to Yes, Receivables credits the accounts of the original transaction. If this profile option is set to No, Receivables uses AutoAccounting to determine the freight, receivables, revenue, and tax accounts. Receivables uses the account information for on-account credits that you specified in your AutoAccounting structure to create your journal entries.
You can update accounting information for your credit memo after it has posted to general ledger. Receivables keeps the original accounting information as an audit trail while it creates an offsetting entry and the new entry.
If you unapply the standard credit memo, Receivables reverses the accounting entries and creates the following journal entry:
Debit |
Credit |
---|---|
Receivables (Invoice) |
None |
None |
Receivables (Credit Memo) |
The standard credit memo is converted to an on-account credit memo.
If the Invoice Accounting Used for Credit Memos profile option is set to No, then when you unapply the standard credit memo you must enter a Receivable account.
This section describes the default accounting entries for on-account credits.
When you enter an on-account credit, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Revenue (if you credit line amounts) |
None |
Tax (if you credit tax) |
None |
Freight (if you credit freight) |
None |
None |
Receivables (On-Account Credit) |
Receivables uses the freight, receivable, revenue, and tax accounts that you specified in your AutoAccounting structure to create these entries.
Once the on-account credit is applied to an invoice, the following journal entry is created:
Debit |
Credit |
---|---|
Receivables (On-Account Credit) |
None |
None |
Receivables (Invoice) |
Receipts
This section describes the default accounting entries for receipts.
When you enter a receipt, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables |
When you fully apply a receipt to an invoice, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
Unapplied Cash |
None |
None |
Unapplied Cash |
None |
Receivables |
These examples assume that the receipt has a Remittance Method of No Remittance and a Clearance Method of Directly.
When you enter an unidentified receipt, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
None |
Unidentified |
When you enter an on-account receipt, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
None |
Unapplied |
Unapplied |
None |
None |
On-Account |
When your receipt includes a discount, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables |
Earned/Unearned Discount |
None |
None |
Receivables |
Receivables uses the default cash, unapplied, unidentified, on-account, unearned, and earned accounts that you specified under remittance banks for this receipt class.
When you enter a receipt and combine it with an on-account credit (which increases the balance of the receipt), Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
None |
Unapplied Cash |
To close the receivable on the credit memo and increase the unapplied cash balance, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Receivables |
None |
None |
Unapplied Cash |
When you enter a receipt and combine it with a negative adjustment, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables (Invoice) |
Write-Off |
None |
None |
Receivables (Invoice) |
You set up a Write-Off account when defining your receivables activity.
When you enter a receipt and combine it with a positive adjustment, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables (Invoice) |
Receivables (Invoice) |
None |
None |
Write-Off |
When you write off the unapplied amount on a receipt, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Unapplied Cash |
None |
None |
Write-Off |
When you enter a receipt and combine it with a chargeback, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables (Invoice) |
Receivables (Chargeback) |
None |
None |
Chargeback (Activity) |
Chargeback (Activity) |
None |
None |
Receivables (Invoice) |
You set up a Chargeback account when defining your receivables activity.
To move funds between receipts, you can apply one receipt to another open receipt. These journal entries illustrate moving funds from Receipt 1 to Receipt 2:
Debit |
Credit |
---|---|
Unapplied Cash (Receipt 1) |
None |
None |
Netting (Receipt 1) |
Netting (Receipt 2) |
None |
None |
Unapplied Cash (Receipt 2) |
Both receipts must be in the same currency.
After this receipt-to-receipt application completes, Receipt 2 gains additional funds that you can then apply to a debit item.
You set up a Payment Netting account when defining your receivables activity.
If both receipts are in a foreign currency, however, then you could have an exchange gain or loss when you net the receipts. The exchange gain or loss is realized on the main receipt (Receipt 2) at the time of receipt application (netting).
If you later adjust the conversion rate on Receipt 1 or 2, the following actions are performed:
-
Roll back all accounting for both receipts.
-
Recreate the accounting, including the netting application, using the adjusted conversion rate.
-
Recalculate the exchange gain or loss on whichever receipt gained the additional funds.
Remittances
This section describes the default accounting entries for remittances.
When you create a receipt that requires remittance to your bank, Receivables debits the Confirmation account instead of Cash. An example of a receipt requiring remittance is a check before being cashed. Receivables creates the following journal entry when you enter such a receipt:
Debit |
Credit |
---|---|
Confirmation |
None |
None |
Receivables |
You can then remit the receipt to your remittance bank using one of the two remittance methods: Standard or Factoring. If you remit your receipt using the standard method of remittance, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Remittance |
None |
None |
Confirmation |
When you clear the receipt, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
Bank Charges |
None |
None |
Remittance |
If you remit your receipt using the factoring remittance method, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Factor |
None |
None |
Confirmation |
When you clear the receipt, Receivables creates a short-term liability for receipts that mature at a future date. The factoring process lets you receive cash before the maturity date, and assumes that you're liable for the receipt amount until the customer pays the balance on the maturity date. When you receive payment, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Cash |
None |
Bank Charges |
None |
None |
Short-Term Debt |
On the maturity date, Receivables reverses the short-term liability and creates the following journal entry:
Debit |
Credit |
---|---|
Short-Term Debt |
None |
None |
Factor |
Adjustments
This section describes the default accounting entries for adjustments.
When you enter a negative adjustment against an invoice, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Write-Off |
None |
None |
Receivables (Invoice) |
When you enter a positive adjustment against an invoice, Receivables creates the following journal entry:
Debit |
Credit |
---|---|
Receivables (Invoice) |
None |
None |
Write-Off |
Debit Memos
This section describes the default accounting entries for debit memos.
When you enter a debit memo, Receivables creates the following journal entries:
Debit |
Credit |
---|---|
Receivables |
None |
None |
Revenue (if you enter line amounts) |
None |
Tax (if you charge tax) |
None |
Freight (if you charge freight) |
Receivables |
None |
None |
Late Charges |
Credit Card Refunds
This section describes the default accounting entries for credit card refunds.
When you unapply a receipt and reapply the receipt to a credit card refund, Receivables creates these journal entries:
Debit |
Credit |
---|---|
Receivables |
None |
None |
Unapplied |
Unapplied |
None |
None |
Receivables Activity (Clearing Account) |
After you apply the receipt to a credit card refund, Receivables automatically creates a negative miscellaneous receipt in the amount of the refund and creates this journal entry:
Debit |
Credit |
---|---|
Receivables Activity (Clearing Account) |
None |
None |
Cash |
When you reverse a credit card refund, either by reversing the negative miscellaneous receipt or by unapplying the credit card refund activity, Receivables creates this journal entry for the negative miscellaneous receipt:
Debit |
Credit |
---|---|
Cash |
None |
None |
Receivables Activity (Clearing Account) |
Receivables creates this journal entry for the original payment receipt:
Debit |
Credit |
---|---|
Receivables Activity (Clearing Account) |
None |
None |
Unapplied |