Debtors (Accounts Receivable)
   

When a service is performed, or a product is supplied, on credit, the entity earns revenue in the month of the sale, even if it receives the cash later on. When the sale is made, the entity has an asset, Debtors (also known as Accounts Receivable), which represents the amount that the customer owes. Assume that, in January, €1,000 of goods were provided to the Art Emporium Company, a credit customer, and they pay the €1,000 in February. The entries are:
 
In January:

Dr. Debtors -  
Art Emporium Company  
€1,000

Cr. Service Revenue  

€1,000
 
 
In February:

Dr. Cash  
€1,000

Cr. Debtors -  
Art Emporium Company  

€1,000
 
 
The effect of these entries is that service revenue is credited in the month of sale, and an asset, Debtors, is created in that month. Later on, when the customer remits cash, Cash increases and Debtors decreases by the amount of the payment.