Last post we bulleted a list of components of a Cash Applications setup, http://faoblog.com/processes-ar-cash-applications3/

Let’s talk about the accounting entry in case of Cash Applications process. In the scenario of most of the ERP systems, two entries will be passed, one when the money is received and the second when applying the amount.

For a receipt of $2,000, the entries would be:

At the time of receipt-

Bank account Dr.                    $ 2,000

To Customer A/c                                $ 2,000

At the time of application-

Customer A/c Dr.                    $ 2,000

To ABC Customer A/c                                    $ 2,000

This usually will be in two different modules and subsequently, primary book balance of the customer account will have to be tallied with the subsidiary book.

The above is just a sample entry, which may differ slightly based on the type of / location of the remittance.

Now, there can be different types of cash application process segments, depending on the type of remittance / location of remittance. Some of these can be as below:

  • Checks / cheques received
  • Wire transfers
  • ACH transfers
  • SWIFT transfers
  • International transfers
  • Cash remittances
  • Lock Boxes

Why I actually bring this is because, you may be asked to map each of these components differently, based on the process steps.

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