Received Partial Payment Journal Entry
Partial payment is the process by which a company pays only a percentage of the whole payment.
When the company sells goods or services on credit, it will allow the customer to own goods or services before making payment. The payment term will depend on the seller’s credit term. Sometimes sellers will adjust the credit term based on the customer credit rating.
The customer requires to make payment no later than the due date. Some customers make partial payments rather than full payments. It depends on the negotiation between seller and buyer. The partial payment happens when customer pays only a portion of the total amount.
The seller who receives partial payment needs to record cash for the same amount and reverse accounts receivable. But instead of reversing the whole amount, the seller only reverses a portion of the total transaction. The remaining balance will remain on the balance sheet. The customer still has obligation to settle the remaining balance.
Received Partial Payment Journal Entry
When selling on credit, the seller will record accounts receivable and sales revenue. The company will delay cash receive
The journal entry is debiting accounts receivable and credit sales revenue.
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | $$$ | |
| Sales Revenue | $$$ |
The transaction will increase accounts receivable on the balance sheet. The sales revenue will increase on the income statement.
The payment date will vary depending on the credit term and the customer cash flow.
When the customer makes the payment, the seller needs to record cash received and reduce the accounts receivable. The recording of partial payment is also the same as full payment. The journal entry is debiting cash and credit accounts receivable.
| Account | Debit | Credit |
|---|---|---|
| Cash | $$$ | |
| Accounts Receivable | $$$ |
Received Partial Payment Journal Entry Example
Company ABC sells the goods for $ 100,000 to a customer on 01 July. Based on the long-term relationship, ABC decide to provide a credit term of 30 days. The customer must make payment within 30 days otherwise they will be a penalty of 1% per month.
On 15 July, the customer make a payment of $ 40,000 to the company. And the final payment of $ 60,000 is made on 30 July. Please prepare a journal entry for partial payment received.
ABC sells goods to customer on credit, the company have to record accounts receivable and sales revenue. It is just a normal sale on a credit record. The journal entry is debiting accounts receivable of $ 100,000 and credit sales of $ 100,000.
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | 100,000 | |
| Sales Revenue | 100,000 |
ABC records account receivable of $ 100,000 which will increase on the balance sheet. Sales revenue will be recorded as $ 100,000 on income statement.
On 15 July, the company receives partial payment from the customer, they need to reverse the accounts receivable and recognize cash on balance sheet. The amount recorded will depend on the amount of cash receive. The journal entry is debiting cash of $ 40,000 and credit accounts receivable of $ 40,000.
| Account | Debit | Credit |
|---|---|---|
| Cash | 40,000 | |
| Accounts Receivable | 40,000 |
The transaction will record cash based on the amount received and reduce the accounts receivable amount. it is the same as the full payment received, the difference is the amount recorded.