All 23 Cash Application questions
More in Cash Application
What is the journal entry to record a customer payment received? What is unapplied (or unidentified) cash? What is remittance advice from the customer's side and why is it important for cash application? What is the difference between a payment and a receipt in AR? What does it mean to post a receipt 'on account'? What happens to the AR balance when a receipt is applied? How does automated cash application (auto-matching) work? How do you handle a short payment or overpayment during cash application? What are customer deductions (chargebacks) and how are they managed? What is a lockbox and how does it help cash application?
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Accounts Payable & Receivable › Cash Application

What is cash application in accounts receivable?

Beginner

Answer

Cash application is the process of matching incoming customer payments to the correct open invoices and posting them to clear those receivables. Accurate, timely application keeps the AR ledger clean, ensures customers aren't wrongly chased for paid invoices, and reflects true outstanding balances for collections and reporting.
Real-world example When a customer's ACH lands, the AR team matches it to invoices #201-#203 and clears them the same day.

Common follow-ups: Why does prompt cash application matter? | What clears when a payment is applied?

Reconciliations Collections & Bad Debts Cash Application
All 23 Cash Application questions