Payments · Level: Basics
Journal entry: Customer pays an invoice
An open receivable is settled by bank transfer. Bank goes up and the receivable is cleared.
Worked example
Hall Builders settles the open invoice of £21,660.00 by bank transfer.
Correct journal entry
Bank £21,660.00 / Trade receivables £21,660.00
Debit
Bank£21,660.00
Credit
Trade receivables£21,660.00
Why?
- Bank: asset increases → debit
- Trade receivables: asset decreases → credit
Typical mistake
Booking Sales or Output VAT again when the money comes in.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
Bank statement: Johnson Ltd has paid £5,520.00 for our invoice.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for customer pays an invoice?
Example: Bank £21,660.00 / Trade receivables £21,660.00.
How do I recognise this case?
An open receivable is settled by bank transfer. Bank goes up and the receivable is cleared.
What is the typical mistake?
Booking Sales or Output VAT again when the money comes in.