Customers' credit balances are credit balances in accounts

receivable resulting from overpayments, returns and allowances, and

advance payments from customers.
These credit balances are classified as current liabilities and are not
offset against the debit balances in other Customer’s accounts, except
when the same is not material in which case only the net accounts
receivable may be presented.
For example, the accounts receivable controlling account reports a
balance of P500,000. Examination of the Subsidiary ledgers reveals the
following details in the customer’s account.

CUSTOMER A

Accounts Receivable 800,000

Sales 800,000
Cash 400,000
Accounts Receivable 400,000
Accounts Receivable 400,000

CUSTOMER B

Accounts Receivable 600,000

Sales 600,000
Cash 450,000
Accounts Receivable 450,000
Accounts Receivable 150,000

CUSTOMER C

Accounts Receivable 500,000

Sales 500,000
Cash 450,000
Accounts Receivable 450,000
Sales Returns 100,000
Accounts Receivable 100,000
Accounts Receivable (50,000)
Customers’ balances (50,000)
 Accounting Freight Charge
For example, an entity has a P 100,000 account receivable at the end of
accounting period. The terms are 2/ 10, n/ 30, FOB destination and
freight collect. The customer paid freight charge of P5,000.

1. To record the sale:

Accounts Receivable 100,000
Freight out 5,000
Sales 100,000
Allowance for Freight Charge 5,000

2. To record the collection within the discount period:

Cash 93,000
Sales Discount 2,000
Allowance for Freight Charge 5,000
Accounts Receivable 100,000

Allowance for Sales Returns

For example, an amount of P50,000 of the total accounts receivable at
year-end represents selling price of goods that will probably be returned. The
journal entry to recognize the probable return is:

Sales return 50,000

Allowance for sales return(A.R) 50,000

Allowance for Sales Discount

For example, of the accounts receivable of P 1,000,000 at the end of

the period, it is reliably estimated that discounts to be taken will
amount to P50,000.

1. The adjustment to record the expected sales discount is:

Sales discount 50,000
Allowance for sales discount 50,000