An accounts receivable trial balance is an accounting tool used to total up all of the credits and debits pertaining to a company's accounts receivables. Accounts receivable are all those outstanding debts owed by customers who have purchased goods and services from a company but have not yet completed payment. Since there are usually outstanding debts at any given time from certain customers, this balance is generally a debit account, meaning that the total is negative. This balance is part of the overall trial balance sheet compiled by a company's accounting department, a document meant to detail all of a company's credits and debits, which, if the accounting is accurate, should balance out to zero.
It is very rare for a company that deals in sales to receive all of its payments at exactly the time that purchases are made. Instead, companies extend credit to their clients and customers, allowing them to pay later for services or goods purchased at the present time. For accounting purposes, it is important that the relationship between purchases and payments be well documented, which is why accounts receivable trial balance is an important calculation.
When compiling accounts receivable trial balance, it is important for bookkeepers to understand the principles of accounts receivable accounting. If a company makes a sale but does not receive payment, the accounts receivables are debited and sales are credited. Only when the payment is actually received for the items purchased is the accounts receivables ledger credited for the amount of cash that is received.
As a result, since there are usually multiple credit relationships upheld by a company in the course of business, the accounts receivable trial balance will almost always be negative for the time period in which it is taken. To calculate this particular trial balance, a bookkeeper simply totals up all of the accounts receivables credits and subtracts all of the debits. Record-keeping must be accurate to keep track of payments that can be made much later than when the purchase was actually recorded.
The accounts receivable trial balance is just one part of a company's overall trial balance sheet. This sheet totals up all of the balances from the company's various accounts, such as cash, accounts payable, sales, and so on. When all of the various positive and negative balances are combined, the end result should be zero. If that is not the case, the bookkeepers must review the accounts and ledgers to see where mistakes might have been made.