What is a balance of accounts receivable? (with photos)

If a company makes a sale but does not receive payment, accounts receivable are debited and sales are credited.

An accounts receivable balance sheet is an accounting tool used to add up all the credits and debits relating to a company’s accounts receivable. Accounts receivable are all outstanding debts from customers who have purchased goods and services from a company but have not yet completed payment. Since there are usually outstanding debts from certain customers at any given time, this balance is usually a debit account, which means the total is negative. This balance is part of the general balance sheet compiled by a company’s accounting department, a document intended to detail all the company’s credits and debits, which, if accounting is accurate, should have a balance of zero.

An accounts receivable trial balance is an accounting tool used to total up all credits and debits relating to a company’s accounts receivable.

It is very rare for a sales company to receive all of its payments exactly at the time purchases are made. Instead, companies extend credit to their customers and consumers, allowing them to pay later for services or goods purchased on the spot. For accounting purposes, it is important that the relationship between purchases and payments is well documented, which is why the balance of accounts receivable is an important calculation.

When compiling the accounts receivable balance sheet, it is important for accountants to understand the principles of accounts receivable accounting. If a company makes a sale but does not receive payment, accounts receivable are debited and sales are credited. Only when payment is actually received for the items purchased is the accounts receivable ledger credited for the cash amount received.

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As a result, as there are often multiple credit relationships maintained by a company in the course of business, the accounts receivable balance sheet will almost always be negative for the time period in which it is assumed. To calculate this particular trial balance, an accountant simply adds up all accounts receivable credits and subtracts all debits. Record keeping must be accurate to keep track of payments that can be made much later than when the purchase was actually recorded.

The accounts receivable balance sheet is just one part of a company’s general balance sheet. This worksheet totals all the balances of the various accounts in the company, such as cash, accounts payable, sales, and so on. When all the various positive and negative balances are combined, the final result must be zero. If this is not the case, accountants should review the accounts and books to see where mistakes may have been made.

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