[anngoodas]

I need help in accounting

[pready]

What do you need help with?

[anngoodas]

I don't quite understand the whole accounts receivable and payable term and also, how would u know when to debit or credit when posting to the general journal. Thanks a lot!

[anngoodas]

Also, if for e.g.. Collections on accounts receivable were $5650 for the year should I debit the cash account and credit the receivable account?

[pready]

When you provide a product or services to a customer on credit is an Account Receivable, which is an asset, usually a current asset. When you purchase something on credit is known as an Account Payable, which is a Liability, usually a current liability.

For a sale on credit to a customer the typical journal entry will be:
Debit Accounts Receivable for the amount
Credit Sales Revenue (or appropriate Revenue or Unearned Revenue account)

When the customer makes a payment the journal entry will be:
Debit Cash for the amount received
Credit Accounts Receivable for the amount

When you purchase something on account the typical journal entry will be:
Debit Purchases (or appropriate account) for the amount
Credit Accounts Payable for the amount

When you make a payment the journal entry will be:
Debit Accounts Payable for the amount
Credit Cash for the amount paid

Of course there are other types of journal entries for accounts receivable and payable as well.

[anngoodas]

Thanks again! Your really helping me to understand a whole lot better

[anngoodas]

I have another ques. Concerning the term accruals. I know it has something to do with unpaid revenue or expense at the end of a financial year. Can you explain more on this

[anngoodas]

An e.g.. Involving accruals - salaries amounting to $9230 for the year of which $250 of which was accrued. I kind of confused at this point. The accounts to be affected are salaries expence and payable? Not sure if I'm thinking of the right thing

[pready]

An Accrued Expense is an expense that has been incurred at the end of an accounting period, but not yet paid. A prime example is wages. For example if the accounting period ends on a Wednesday and the work week ends on a Friday you will have accrued wages for 3 days that you have to account for because your workers worked 3 days so you have incurred an expense for 3 days. The journal entry to record this will be:
Debit Wages Expense for 3 days worth of wages
Credit Wages Payable for the amount.

During the next accounting period you pay wages for the 5 day work week your journal entry will be:
Debit Wages Expense for 2 days of wages
Debit Wages Payable for 3 days of wages
Credit Cash for 5 days of wages paid.

Accrued Revenues are revenues that have been earned at the end of an acocunting period, but not yet received. For an example you provided accounting services to a client at the end of an accounting period, but did not bill the client yet; the journal entry will be:
Debit Accounts Receivable for the amount earned
Credit Service Revenue for the amount earned.

[anngoodas]

Does this mean that I would have to do a total of 3 entries instead of 2 in the journal

[pready]

It depends on the type of entry you are making. Normally you will do an adjusting entry at the end of the accounting period to record the accrual, then you do another journal entry in the next accounting period to record the receipt or payment on the accrual.