[richiem]

Current Student here,

Trying to set up a sample business.

I understand that when I bill a customer I debit accounts receivable and am I correct in posting a credit to a Revenue account?

To close the account at end of fiscal period:

Initial transaction is to post a debit to accounts receivable and credit to Revenue Account

To close the revenue accounts I would debit the revenue account and then credit Retained Earnings. Debits = Credits


To close the expenses:

I understand the initial transaction credit cash and debit expense.

To close the account I would credit the expense and debit Retained Earnings. Debits = Credits

Is this correct?

Thanks.


RichieM





Thanks.

Rich

[Superfly999]

Taken from: Accounting Terms-Accounting Dictionary-Accounting Glossary
OFFSET ACCOUNT is an account that is setup for elimination of a long or short position by making an opposite transaction.

I don't think there is a need for an offset account for Accounts Receivable. If you are using the Accural accounting (which from above you are), when you bill the customer just dr. accounts receivable AND cr. Sales (or whatever your income account it) and when the customer pays just dr. Cash AND cr. Accounts receivable. Hope this helps.

[bhet]

The offsetting of A/R is only used when the company has a high ratio of uncollected debts. Usually if a business entity has receivables outstanding for a long time, and is not sure if they can still collect it, they set up an account "dr. Doutful account exp and cr. allow for doubttful accts." if they can't coolect it, they would dr. allow for doubttful accts and cr A/R. that's how A/R offsetting is done.

[flyingbags]

Better late than never?

At the time of the sale:

Dr Accounts Receivable
Cr Inventory

Dr Cost of Goods
Cr Revenue or sales

When you get paid :

Dr Cash
Cr Accounts Receivable

[flyingbags]

Closing entries:

Dr. Revenues
Cr. Retained Earnings