Journalize down payments on alterations

by David
(Manhattan )

From Ask the Expert:


When working in a business and partial of the business transactions include down payments. How do you journalize the transaction when a customer makes partial of the payment and promises to pay the rest later?

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Hi David!

If a customer makes a down payment, and promises to pay the rest in payments, you have a sale and an 'accounts receivable' which is an asset account.

Like this:

Cash..........................$ 500
Accounts Receivable......$1,000
Sales....................................$1500

Then when the customer makes a payment, do a journal entry like this:

Cash..................$ 200
Accounts Receivable...........$200

Now your receivable would have a balance of $1000 less the $200 payment, or $800.

Remember to keep track of the balance and remind your customer of it too with statements or reminders sent out to them once a month til paid in full.

Hope that helps David.

Thanks for your question, and if I can be of further help just let me know.

Remember to sign up for my newsletter, too!

Kathy

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Jun 10, 2013
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Glad that helped!
by: Kathy

Glad that helped, David.

Any more problems, be sure to let me know!

Kathy

Jun 06, 2013
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Thank you
by: David Bazile

Thank you for your input. Okay, I figured one of the accounts that would be affected was the Accounts receivable. The cash and sales was a bit tricky but now it makes more sense.

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