Journal Entries Generated by Accounts Receivable

When you post transactions, journal entries are created in general ledger. The journal entries that are created vary depending on transaction type.

The following sections include information about the journal entries associated with Accounts Receivable transactions:

Invoices

On the G/L Transactions report, invoices are assigned source code AR‑IN.

Posted invoices debit the customer's Receivables Control account and credit the general ledger revenue account specified with each invoice detail (either directly or by distribution code).

Journal Entries for Invoices
G/L Account Debit Credit
Retainage Control X  
Receivables Control X  
     Revenue and other accounts   X

The entry for a retainage invoice (or debit note) is:

Journal Entries for Retainage Invoices
G/L Account Debit Credit
Receivables Control X  
     Retainage Control   X

Credit Notes

On the G/L Transactions report, credit notes are assigned source code AR‑CR.

Posted credit note transactions debit the general ledger accounts you enter with the document details and credit the customer's Receivables Control account.

Journal Entries for Credit Notes
G/L Account Debit Credit
Revenue and other accounts X  
     Receivables Control   X
     Retainage Control   X

The entry for a retainage credit note is:

Journal Entries for Retainage Credit Notes
G/L Account Debit Credit
Retainage Control X  
     Receivables Control   X

Debit Notes

On the G/L Transactions report, debit notes are assigned source code AR‑DB.

Posted debit note transactions debit the customer's Receivables Control account and credit the general ledger accounts you enter with the debit note details.

Journal Entries for Debit Notes
G/L Account Debit Credit
Retainage Control X  
Receivables Control X  
     Revenue and other accounts   X

Interest Invoices

On the G/L Transactions report, interest invoices are assigned source code AR‑IT.

Posted interest invoice transactions debit the customer's Receivables Control account and credit the Interest Income account specified for the interest profile.

Journal Entries for Interest Invoices
G/L Account Debit Credit
Receivables control X  
     Interest income   X

Recurring Charge Invoices

On the G/L Transactions report, recurring charge invoices are assigned source code AR‑IN.

Posted recurring charge invoices debit the customer's Receivables Control account and credit the general ledger accounts you enter with the invoice details.

Journal Entries for Recurring Charge Invoices
G/L Account Debit Credit
Receivables Control X  
     Revenue and other accounts   X

Receipts

On the G/L Transactions report, receipts are assigned source code AR‑PY, and discounts are assigned the source code AR‑ED.

Receipts debit the Bank account specified for the receipt batch, debit the Sales Discounts account (if a discount is taken), and credit the customer's Receivables Control account.

Journal Entries for Receipts
G/L Account Debit Credit
Bank X  
Sales Discounts X  
     Receivables Control   X

Prepayments

On the G/L Transactions report, prepayments are assigned source code AR‑PI.

When you post a prepayment, Accounts Receivable debits the amount to the Bank account specified for the receipt batch and credits the Prepayment Liability account specified in the customer’s account set.

Journal Entries for Prepayments
G/L Account Debit Credit
Bank X  
     Prepayment Liability   X

Prepayments applied to invoices debit the Prepayment Liability account and credit the customer’s Receivables Control account.

Journal Entries for Prepayments Applied to Invoices
G/L Account Debit Credit
Prepayment Liability X  
     Receivables Control   X

Miscellaneous Receipts

On the G/L Transactions report, miscellaneous receipts are assigned source code AR‑PY.

Miscellaneous receipts debit the receipt batch Bank account and credit the general ledger accounts entered with distribution details in the Miscellaneous Receipt Distribution screen in Receipt Entry.

Journal Entries for Miscellaneous Receipts
G/L Account Debit Credit
Bank X  
     Revenue and other accounts   X

Unapplied Cash

On the G/L Transactions report, unapplied cash receipts are assigned source code AR‑UC.

Unapplied cash receipts debit the Bank account for the receipt batch and credit the customer’s Receivables Control account.

Journal Entries for Unapplied Cash Receipts
G/L Account Debit Credit
Bank X  
     Receivables Control   X

Adjustments

On the G/L Transactions report, adjustments are assigned source code AR‑AD.

Exchange Gains or Losses

On the G/L Transactions report, exchange gains or losses are assigned source code AR‑GL (for "gain/loss").

In a multicurrency system, exchange gains or losses result when you revalue or settle an invoice using an exchange rate that is different from the rate currently used by the invoice.

Arising on Settlement

If you settle an invoice using an exchange rate that is different from the rate currently used by the invoice, and the exchange rate on settling reduces the value of the invoice, the transaction registers a gain.

If posting changes the value of an invoice (for example, through partial payment, full payment, or credit note), Accounts Receivable calculates the gain or loss for the portion of the invoice that was changed by the posting, and creates gain or loss transactions for the general ledger accounts.

Journal Entry for Exchange Gain on Settlement
G/L Account Debit Credit
Receivables Control X  
     Exchange Gain (or Realized Exchange Gain)   X
Journal Entry for Exchange Loss on Settlement
G/L Account Debit Credit
Exchange Loss (or Realized Exchange Loss) X  
     Receivables Control   X

Note: Credit notes and debit notes do not affect gains or losses if they are issued at the exchange rate of the original invoice. However, they will generate gains or losses if they are issued at a different rate.

During Revaluation

If you revalue an invoice in a source (non-functional) currency at an exchange rate that is different from the rate currently used by the invoice, and the changes in the exchange rate increase the value of the invoice, the transaction registers a loss. In this situation, the following journal entries are created:

Journal Entry for Exchange Loss Arising from Revaluation
G/L Account Debit Credit
Exchange Loss (or Unrealized Exchange Loss) X  
     Receivables Control   X
Journal Entry for Exchange Gain Arising from Revaluation
G/L Account Debit Credit
Receivables Control X  
     Exchange Gain (or Unrealized Exchange Gain)   X

If you use the Realized and Unrealized Gain/Loss accounting method for your company, exchange gains and losses are considered "unrealized" until the document is paid. Revaluation sends unrealized gain and loss transactions to General Ledger as reversing transactions (meaning they are automatically reversed at the beginning of the next fiscal period), as follows:

Reversal of Journal Entry for Unrealized Exchange Loss
G/L Account Debit Credit
Receivables Control X  
     Unrealized Exchange Loss   X
Reversal of Journal Entry for Unrealized Exchange Gain
G/L Account Debit Credit
Unrealized Exchange Gain X  
     Receivables Control   X

When you print the Customer Transactions report for the period in which you post the reversing revaluation transaction, both transactions appear for the customer. Their net effect on the account balance is zero.

If you use the Recognized Gain/Loss accounting method, revaluation exchange gains and losses are not reversed.