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+--- Thread: How to enter Account Receviable in a General Ledger - Confused... (/Thread-How-to-enter-Account-Receviable-in-a-General-Ledger-Confused)
How to enter Account Receviable in a General Ledger - Confused... - Kephrem1 - 04-18-2013
I am looking at a transaction on general ledger and I have a question in understanding why I do one thing vs. another.
Transaction: Billed a customer 2,000 for service performed (how do I enter it)
Below is the right way to enter it because it is the answer (however, I am confused by this entry below are my reasons why, can you please help me with what am I missing in my logic)
Accounts Receivable 2,000 Dr
Cash 2,000 Cr
Account receivable is an Asset account (Assets go up by Dr, & down by Cr). when you bill someone your asset goes up so you Dr it (this makes sense to me)
Cash - why do you Cr is (Cash is a Asset account and it goes up by Dr, and down by Cr). So when you enter cash as Cr I understand this as a decrease in an asset?
One explanation of the entry above is based on doing normal balance transactions, is this where I am wrong in how I understand entries? If I were to follow normal balance logic, then the entry above would make sense (i.e. Accounts Receivable = Revenue Account therefor normal bal = Cr and Cash = Asset Account therefor normal balance = Dr).
Sorry long paragraph but trying to understand what am I missing in my logic in entry. Am I basing entries based on normal balance or looking at what makes an account go up vs. go down.
thank you all for your help!!
How to enter Account Receviable in a General Ledger - Confused... - amilitab4k9 - 04-19-2013
I'm not a professional, but I've completed 3 accounting courses and am currently in the middle of two. I disagree with the answer given above. Essentially the answer is trading cash for accounts receivable, which would only happen if you were buying accounts receivable from someone, not providing services. Based on the transaction I would Debit Accounts Receivable and Credit Service Revenue. It sounds like you have a decent understanding of the concepts, but the given answer is wrong and is messing you up. (Accounts Receivable is an asset account, but directly related to a revenue account.)
Anyone that knows better, feel free to correct me.