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Furthermore, the accounting system must correctly match the cash collections with the specific sales year so that the correct gross profit percentage be applied. [6] On the balance sheet, "the accounts receivable - installment sales" is classified as current assets if it is due within 12 months of the balance sheet.
Accounts receivable are classified as current assets assuming that they are due within one calendar year or financial year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry.
Contra-accounts are accounts with negative balances that offset other balance sheet accounts. Examples are accumulated depreciation (offset against fixed assets), and the allowance for bad debts (offset against accounts receivable). Deferred interest is also offset against receivables rather than being classified as a liability.
The general ledger should include the date, description and balance or total amount for each account. Because each bookkeeping entry debits one account and credits another account in an equal amount, the double-entry bookkeeping system helps ensure that the general ledger is always in balance, thus maintaining the accounting equation:
In special journal, transactions are recorded in a single line, and the format of the journal made it possible to post only the total amount for each account to the general ledger. For example, if fifty sales on account were made during one day, only the total amount for Accounts Receivable, Sales, and Sales Tax Payable were posted to the ...
Every entry to an account requires a corresponding and opposite entry to a different account. The double-entry system has two equal and corresponding sides, known as debit and credit; this is based on the fundamental accounting principle that for every debit, there must be an equal and opposite credit. A transaction in double-entry bookkeeping ...
Journal entries can record unique items or recurring items such as depreciation or bond amortization. In accounting software , journal entries are usually entered using a separate module from accounts payable , which typically has its own subledger , that indirectly affects the general ledger .
Normal Balances refer to whether the balance for an account in a properly-formed trial balance is usually a debt or a credit. A normal balance also reflects the accounting equation. If a trial balance for an account is reversed, such an account is called a "contra-account" (e.g. accumulated depreciation as an asset or owners drawings as equity ...
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