All 23 Cash Application questions
More in Cash Application
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'? 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? How are returned/NSF customer payments handled after they were applied? How is customer credit balance or prepayment handled in AR?
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Accounts Payable & Receivable › Cash Application

What happens to the AR balance when a receipt is applied?

Beginner

Answer

Applying a receipt reduces the specific open invoice balances it's matched to and lowers the customer's total AR. Fully paid invoices are marked closed; partially paid ones show a residual. The GL AR control account and the customer's sub-ledger both decrease by the applied amount.
Real-world example Applying $5,000 across two invoices closes them and drops the customer's AR balance by $5,000.

Common follow-ups: What happens to a partially paid invoice? | How do the GL and sub-ledger move?

Aging Analysis Reconciliations Cash Application
All 23 Cash Application questions