Quick answer: Accounts receivable (A/R) is recorded when you earn revenue and issue an invoice. You debit Accounts Receivable and credit Revenue. When cash is collected, you debit Cash and credit Accounts Receivable. For expected non-collection, you typically use an Allowance for Doubtful Accounts (contra-asset) and recognize Bad Debt Expense.
Accounts receivable — journal entries (quick examples)
Invoice issued (sale on credit)
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | XXX | |
| Revenue | XXX |
Cash collected from customer
| Account | Debit | Credit |
|---|---|---|
| Cash / Bank | XXX | |
| Accounts Receivable | XXX |
Sales return / allowance (credit memo)
| Account | Debit | Credit |
|---|---|---|
| Sales Returns and Allowances (or Revenue) | XX | |
| Accounts Receivable | XX |
Bad debt expense (allowance method)
| Account | Debit | Credit |
|---|---|---|
| Bad Debt Expense | XX | |
| Allowance for Doubtful Accounts | XX |
Write off an uncollectible receivable
| Account | Debit | Credit |
|---|---|---|
| Allowance for Doubtful Accounts | XX | |
| Accounts Receivable | XX |
Table of Contents
Invoice issued (sale on credit)
When you deliver goods or services and you have an unconditional right to consideration, you typically recognize revenue and record the receivable. In practice, this often aligns with issuing an invoice to the customer.
Example: You invoice a customer $10,000 for services delivered, payable in 30 days.
| Account | ||
|---|---|---|
| Accounts receivable | $10,000 | |
| Service revenue | $10,000 |
Cash collected (settle the receivable)
When the customer pays, you remove (credit) the receivable and increase (debit) cash. The collection itself does not change revenue—revenue was recognized when earned.
Example: The customer pays the $10,000 invoice.
| Account | ||
|---|---|---|
| Cash / bank | $10,000 | |
| Accounts receivable | $10,000 |
Sales returns and allowances (credit memos)
If you issue a credit memo for returns, pricing adjustments, or customer claims, you reduce the amount owed. Depending on your chart of accounts, you may debit a separate Sales returns and allowances account (contra-revenue) or debit Revenue directly.
Example: You approve a $500 credit memo against an outstanding invoice.
| Account | ||
|---|---|---|
| Sales returns and allowances (or revenue) | $500 | |
| Accounts receivable | $500 |
Bad debts (allowance method)
Many businesses estimate expected credit losses and record an allowance (a contra-asset) rather than waiting until a specific invoice is proven uncollectible. This improves matching—bad debt expense is recognized in the same period as the related revenue (to the extent estimates are supportable).
Record / adjust the allowance
At period-end, you update the allowance based on your policy (for example, an aging analysis) and recognize the corresponding expense.
| Account | Debit | Credit |
|---|---|---|
| Bad debt expense | XX | |
| Allowance for doubtful accounts | XX |
Direct write-off method (often for immaterial balances)
Under a direct write-off approach, you recognize bad debt expense only when a specific invoice is deemed uncollectible. Depending on your reporting framework, this may be acceptable only when amounts are clearly immaterial.
Write-offs and recoveries
Write off a specific customer balance
When a receivable is no longer expected to be collected, you typically write it off against the allowance (so you do not double-count expense).
| Account | Debit | Credit |
|---|---|---|
| Allowance for doubtful accounts | XX | |
| Accounts receivable | XX |
Recovery of a previously written-off receivable
Recoveries are commonly recorded in two steps: (1) reinstate the receivable (and allowance) and (2) record the cash receipt.
Step 1 — reinstate the receivable
| Account | Debit | Credit |
|---|---|---|
| Accounts receivable | XX | |
| Allowance for doubtful accounts | XX |
Step 2 — record cash collected
| Account | Debit | Credit |
|---|---|---|
| Cash / bank | XX | |
| Accounts receivable | XX |
Accounts receivable journal entry FAQ
What is the journal entry to record an invoice?
Debit Accounts Receivable and credit Revenue for the invoice amount (net of any expected discounts or adjustments in line with your revenue policy).
What is the journal entry when a customer pays?
Debit Cash / Bank and credit Accounts Receivable for the amount collected.
How do you record a credit memo?
Debit Sales returns and allowances (or Revenue) and credit Accounts Receivable for the amount of the credit memo.
How do you record bad debt expense?
Under an allowance approach, debit Bad Debt Expense and credit Allowance for Doubtful Accounts (a contra-asset). The allowance is then used for specific write-offs.
How do you write off accounts receivable?
Typically: debit Allowance for Doubtful Accounts and credit Accounts Receivable for the amount written off (so you do not record expense twice).
How do you record a recovery?
Commonly two steps: reinstate the receivable (debit A/R, credit allowance), then record the cash receipt (debit cash, credit A/R).
Does writing off A/R affect cash?
No. A write-off reduces Accounts Receivable (and allowance) but does not involve cash. The cash impact occurs (or does not occur) through collections.
Internal links (related)
- Journal entries for unearned revenue
- Loan received journal entry (bank loan) + monthly payment example
- Journal entries for incorporation costs
- Types of dividends
- Taxation
