Account Receivable Entry in Accounting

An account receivable entry (also called an accounts receivable journal entry) is the bookkeeping record you pass when you sell on credit and a customer owes you money. Accounts receivable (AR) is an asset, so it goes up with a debit and goes down with a credit.

You record AR when you raise the invoice, not when you collect cash. The basic account receivable entry format is: Debit Accounts Receivable and Credit Sales/Revenue. When the customer pays later, you reverse the receivable by recording: Debit Cash/Bank and Credit Accounts Receivable.

• Credit sale made to a customer
• Invoice issued/posted
• Receipt/payment collected and posted
• Credit note issued (return/adjustment)
• Write-off for an uncollectible invoice

Accounts receivable (AR) entries can look different depending on what happened in the sale cycle—invoice raised, money received, return, discount, or a write-off. The table below groups the most common account receivable journal entry formats so you can quickly map the debit (what comes in) and credit (what goes out) impact in your books.

• If you’re looking for an account receivable entry format, start by identifying whether it’s an invoice event (creates AR) or a settlement/adjustment event (reduces AR).
• For GST sales, record tax separately as CGST + SGST/UTGST (intra-state) or IGST (inter-state), and verify the split using your software’s tax analysis/breakup view.
• In many systems (including an account receivable entry in Tally), the voucher type may differ, but the debit/credit impact in the ledgers remains the same.

An account receivable entry is passed when you sell goods or services on credit and the customer will pay later. It records two things at once: the money you are due (Accounts Receivable, an asset) and the income you earned (Sales).

Account receivable journal entry example (with numbers): You raise an invoice of ₹50,000 to Customer A on credit. Later, Customer A pays ₹50,000 into your bank.

In the first entry, your receivable increases by ₹50,000 and your Sales increases by ₹50,000. When the customer pays, your Bank balance increases and the receivable is cleared. If GST applies, the customer is typically debited for the total invoice value, while Sales and the relevant output tax ledgers are credited separately.

To record an accounts receivable entry in Tally/TallyPrime, you typically create the customer (party) balance through a sales invoice, then clear it when you receive payment.

1. Open your company and confirm the customer (party) ledger exists under Sundry Debtors (Accounts Receivable).
2. Enable GST features (if applicable) and check your sales and output tax ledgers are created.
3. Go to Vouchers and select a Sales voucher (or an invoice mode used in your setup).
4. Select the Party A/c name (customer ledger) so the receivable is created against that customer.
5. Choose the Sales ledger and enter the invoice details (items or accounting lines, as per your configuration).
6. Apply the correct GST ledgers: CGST + SGST/UTGST for local (intra-state) sales, or IGST for interstate sales.
7. Review the tax analysis / breakup view and save the voucher to post the receivable.
8. Record the collection later using Receipt voucher: select the customer, pick the bill reference, and allocate the amount received to clear the outstanding.

• Checkpoint: Run the Outstanding Receivables / Bills Receivable report to ensure the customer balance matches.
• Checkpoint: Re-check GST breakup to confirm CGST+SGST/UTGST vs IGST is applied correctly.

Accounts receivable (A/R) affects all three financial statements because it separates “you earned it” from “you collected it”. When you sell on credit, your results can look stronger on paper even if cash has not come in yet. This is why reviewing receivables is important for understanding liquidity (how easily you can pay bills) and working capital (short-term money tied up in day-to-day operations).

In simple terms, A/R builds up when credit sales happen faster than collections, and it comes down when customers pay. That timing difference can change how your business looks across statements during the same month or quarter.

Most errors in an account receivable entry happen because the invoice, customer, and tax breakup don’t match. Use this checklist to avoid rework during audits, GST filings, and collections follow-ups.

• Posting to the wrong customer ledger: Fix by matching customer name/code and invoice number before you post the account receivable journal entry example.
• Recording receipt but not closing the invoice: Fix by adjusting the entry against the correct invoice reference so the outstanding report reduces.
• Wrong cut-off at month-end: Fix by posting AR only for invoices actually raised for the period and reversing entries booked in error.
• Ignoring credit notes/returns: Fix by linking the credit note to the original invoice and updating sales and receivables consistently.
• AR not reconciled with customer-wise outstanding: Fix by reconciling the AR control total to the customer ledger aging every month.
• Incorrect tax split in an account receivable entry with GST: Fix by separating taxable value and GST ledgers so AR equals the invoice total.
• Premature bad-debt write-off: Fix by following your policy and approvals, and documenting whether you use an allowance (reserve) or direct write-off.

To keep your accounts receivable (AR) entry accurate, treat it like a repeatable process—not a one-off journal entry. Use this checklist to reduce posting errors, speed up collections, and keep your customer ledger in sync with your books.

• Document a standard AR entry format: define how you record credit sales, collections, returns, and adjustments.
• Link every entry to support: invoice number, delivery proof, customer confirmation, and bank receipt reference.
• Review the AR aging regularly: check overdue buckets weekly (or at least monthly) and assign follow-ups.
• Reconcile subledger vs. ledger: match customer-wise AR balances to the general ledger before closing.
• Set credit controls: define credit limits, approval rules, and when to stop further credit sales.
• Use a clear credit note workflow: approve returns/discounts before posting AR reductions.
• Control bad-debt write-offs: require documented approval and tie write-offs to specific invoices.
• Segregate duties: separate who raises invoices, who receives cash, and who posts AR entries.