What is the journal entry to record when a customer pays their invoice?
If a customer has an unpaid invoice, then that represents an accounts receivable for a customer. When a customer pays on credit, the company would debit accounts receivable and credit revenue (revenue is recognized when earned).
When the customer pays the invoice, say 30 days later, the the company would debit cash and credit accounts receivable. The debit to cash increases the cash account since the company had an inflow of cash. Since the invoice is no longer outstanding, the company removes the invoice from the accounts receivable balance by crediting accounts receivable.
You might also be interested in...
What is the journal entry to record a credit sale to accounts receivable?
When a company sells merchandise on credit to a customer, the debit is to accounts receivable and the credit is to revenue. Remember, a debit to accounts receivable increases the account, which is an asset on a balance sheet. Then, when the customer pays cash on the receivable, the company would debit cash and credit […]
How do changes in accounts receivable impact a company’s cash flow statement?
When a company’s accounts receivable balance increases, that results in a decrease to net cash flows. A decrease in accounts receivable results in an increase to net cash flows.
How to calculate days sales outstanding (DSO) or days sales in accounts receivable?
This is a metric that reflects the success that the firm has in collecting receivables that remain outstanding. A higher amount of days will generally indicate that the company is taking a longer amount of time to collect its receivables.