Internal controls for accounts receivable are used to reduce the risk of fraud and error in the accounts receivable process. The purpose of the accounts receivable internal control checklist is to ensure that valid sales invoices are properly recorded and that customers pay promptly.
The accounts receivable control account is an account in the general ledger which maintains summary postings relating to accounts receivables. The account, which is sometimes referred to as the sales ledger control account, is used to allow the detail of customer transactions to be kept in a separate subsidiary personal account ledger which is not part of the double entry bookkeeping system.
A business has a balance due from a customer on its accounts receivable ledger, but also owes the customers business an amount on its accounts payable ledger for goods supplied. A contra entry is used to offset the two amounts, leaving a net amount outstanding to the customer.
The chain discount calculator works out a products net price after applying multiple trade discounts to its list price. This free Excel calculator also provides a summary showing the original price, total discount, and net price, together with a calculation of the single equivalent rate (SED).
The allowance for uncollectible accounts method is used to estimate the bad debt expense required to reflect uncollectible accounts receivable at the end of an accounting period. The method complies with the matching principle and for this reason is preferred over the direct write off method.
The direct write-off method of accounting for uncollectible accounts is used to remove specific uncollectible amounts from the accounts receivable balance when they are identified. This debt write off method does not comply with the matching principle and can only be used for immaterial amounts.
A customer has been invoiced a total of 5,000 for goods and the business has decided that there is doubt as to whether the customer can pay in full. They have decided to adjust the allowance for doubtful accounts provision by 500 in respect of the accounts receivable balance of 5,000.