Bookkeeping Basics · Edmonton
Accounts receivable bookkeeping, start to finish.
What accounts receivable really is, the two journal entries behind every invoice, why GST can be due before your customer pays, and how to stop unpaid invoices slipping through the cracks.
By the Plum team- Updated Oct 2026
- 9 min read
- Accounts receivable (AR) is money customers owe you for invoices you've already sent. It's an asset, not income.
- Every invoice creates two entries: one when you bill it and one when the money arrives. Only the first one is income.
- GST is generally owed when you invoice, not when you get paid.
- Run an ageing report every month and follow up on anything past due.
Accounts receivable bookkeeping is the part of your books that tracks who owes you money, how much and for how long. If you ever send an invoice and wait to be paid, you have accounts receivable, whether you call it that or not. Consultants, trades, brokers, practitioners who bill insurers and anyone who does work before collecting all live with it.
Done well, AR tells you exactly how much cash is coming and who needs a nudge. Done badly, it double-counts income, hides unpaid invoices and makes your GST return wrong. This guide walks through the entries, the reports and the habits that keep it clean, with a worked example you can follow line by line.
1What accounts receivable actually is
When you finish a job and invoice it, you've earned the money even though you don't have it yet. Under accrual bookkeeping (see our guide to cash vs accrual accounting), you record the income on the invoice date. The customer's promise to pay goes on your balance sheet as an asset called accounts receivable.
When the customer pays, nothing new is earned. You're just swapping one asset (the receivable) for another (cash). That's the single most important idea in this post, and the source of most AR mistakes.
- Invoice issued: income goes up, AR goes up, GST payable goes up.
- Payment received: bank goes up, AR goes down. Income doesn't move.
- Customer never pays: AR is written off as a bad debt, and the GST can usually be recovered.
2A worked example: one invoice, start to finish
Say you're an incorporated IT consultant in Edmonton, registered for GST. On March 3 you invoice a client $2,000 for a network setup, plus 5% GST, on Net 30 terms.
Entry 1: you send the invoice
| Account | Debit | Credit |
|---|---|---|
| Accounts receivable | $2,100.00 | |
| Consulting income | $2,000.00 | |
| GST/HST payable | $100.00 | |
| Total | $2,100.00 | $2,100.00 |
Your income for March is now $2,000. The $100 GST isn't yours; it's a liability you owe CRA. The customer owes you the full $2,100.
Entry 2: the customer pays on April 1
| Account | Debit | Credit |
|---|---|---|
| Bank (chequing) | $2,100.00 | |
| Accounts receivable | $2,100.00 | |
| Total | $2,100.00 | $2,100.00 |
AR for this customer is back to zero, the bank is up $2,100, and income hasn't changed. If you're new to debits and credits, our debits and credits cheat sheet explains why AR increases with a debit and decreases with a credit.
3GST and accounts receivable in Canada
Here's the part that surprises people. GST generally becomes payable on the earlier of the day you're paid and the day payment becomes due, and an invoice usually makes it due. In practice that means the GST on an invoice belongs in the reporting period you issued it, even if the customer hasn't paid yet.
In the example above, if you file GST quarterly, the $100 lands in your January to March return, even though the cash arrived in April. Businesses with lots of slow payers can end up remitting GST they haven't collected yet. That's normal, and it's a good reason to keep an eye on your AR.
For income tax, sole proprietors report fees on the T2125 and corporations on the T2. Both generally use accrual accounting for business income, so invoiced work counts in the year you billed it, not the year you collected. (Some professionals have their own rules for work in progress; ask your accountant if that applies to you.)
4The ageing report: your AR to-do list
An accounts receivable ageing report groups every open invoice by how overdue it is. It's the single most useful report for a business that bills on terms.
| Customer | Current | 1 to 30 days | 31 to 60 days | 61 to 90 days | Over 90 |
|---|---|---|---|---|---|
| Client A | $4,200 | ||||
| Client B | $6,300 | ||||
| Client C | $5,250 | ||||
| Client D | $2,250 | ||||
| Total $18,000 | $4,200 | $6,300 | $5,250 | $0 | $2,250 |
Read it left to right. Current invoices need nothing. One to 30 days late gets a friendly reminder. Over 60 days needs a phone call. Over 90 days needs a decision: payment plan, collections or write-off.
Days sales outstanding
One number sums up how fast you get paid: days sales outstanding (DSO). Divide your AR balance by your annual sales and multiply by 365. With $18,000 owed and $120,000 in yearly sales, that's 18,000 ÷ 120,000 × 365, or about 55 days. If your terms are Net 30, customers are taking almost twice as long as you asked. Track DSO quarterly and you'll spot a cash crunch before it arrives.
5How accounts receivable works in QuickBooks Online
QuickBooks Online creates the AR entries for you, as long as you use the right forms in the right order.
- Create the invoice: + New, then Invoice. Choose the customer, terms (Net 30 is common) and the GST tax code on each line. QuickBooks posts the debit to Accounts Receivable and the credits to income and GST/HST payable.
- Record the payment: + New, then Receive payment. Tick the invoice being paid. Depending on your setup it will post to a bank account or to Payments to deposit (formerly Undeposited Funds).
- Match the bank feed: when the deposit appears in your bank transactions, choose Match, not Add. Matching links the deposit to the payment you already recorded.
- Run the ageing report: in Reports, search for the accounts receivable ageing summary (or detail). Run it at least monthly.
- Send statements and reminders: QuickBooks can send customer statements and automatic invoice reminders, which saves you writing chasing emails by hand.
If you collect several payments and take them to the bank together, read our guide to Undeposited Funds in QuickBooks so the deposit matches cleanly.
6Common accounts receivable mistakes
1. Adding customer payments as new income
The classic. The payment shows up in the bank feed, someone categorizes it to "Sales," and now the same work has been counted twice: once on the invoice and once on the deposit. Meanwhile the invoice still looks unpaid, so your AR is overstated too. Always match payments to invoices.
2. Invoicing work that was already paid
If a customer paid on the spot, you need a sales receipt, not an invoice. Our post on sales receipts vs invoices explains the difference.
3. Leaving dead invoices on the books
An invoice from two years ago that will never be paid makes your AR look healthier than it is and inflates your assets. Write it off properly so your balance sheet tells the truth.
4. Deleting an invoice instead of crediting it
If you billed the wrong amount, issue a credit memo or edit the invoice in the same open period. Deleting invoices from a period you've already filed GST for changes numbers you've already reported.
5. Ignoring partial payments and short-pays
A customer pays $2,000 on a $2,100 invoice. That $100 sits open forever unless someone decides whether it's a discount, a bank fee or money still owed. Deal with it the month it happens.
6. No follow-up system
Most late invoices aren't disputes. They're forgotten. A reminder at 7 days past due and a call at 30 days solves most of them.
7A monthly AR routine
That last check matters. If the accounts receivable balance on your balance sheet doesn't equal the total of your ageing report, something has been posted straight to the AR account with a journal entry, and it needs to be found.
Plum handles invoicing, payment matching and monthly AR follow-up for businesses across Edmonton, St. Albert, Sherwood Park and Leduc, on flat monthly pricing. If your receivables are a mess, book a call and we'll tell you what it takes to clean them up.
8Questions people ask
What is accounts receivable in bookkeeping?
Accounts receivable is the money customers owe you for work you've already invoiced. It sits on your balance sheet as an asset until the customer pays, when it turns into cash in the bank.
Is accounts receivable an asset or income?
It's an asset. The income is recorded when you issue the invoice; the receivable is just the customer's promise to pay. When the payment arrives, the receivable goes down and your bank balance goes up, with no new income.
Do I owe GST on an invoice the customer hasn't paid?
Usually, yes. GST generally becomes payable when you invoice or when payment is due, whichever comes first, not when you collect. If the customer never pays, you can usually recover that GST through a bad debt adjustment.
How often should I review my accounts receivable?
At least monthly, using an ageing report. Weekly is better if you have a lot of open invoices. The older an invoice gets, the less likely it is to be paid, so early follow-up matters.
Why is my accounts receivable balance wrong in QuickBooks?
The most common cause is customer payments added from the bank feed as new income instead of matched to the open invoice. That double-counts the sale and leaves the invoice looking unpaid.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.