Hello
When I create a new invoice for a client i create the invoice so it is billing as “sale income” in the account box (next to the description box) is this correct?
The invoice then shows up as accounts receivable until the invoice is paid by the client. I presume this is correct?
When i create a balance report the invoice now shows up as an asset which i presume is correct because the client owes me the money but why when i create a trial balance sheet does the unpaid invoice show up as a debit in accounts receivable and a credit in sales income?
Also on the profit and loss section this open invoice shows up as net income even though it hasn’t been paid yet, is that right?
Thanks For Your Help
Dan
Hi Dan,
Yes, when you create an invoice simultaneously affects two accounts: it increases the 'Sales Income' balance (so you can keep track of your total sales for the year) and also your 'Accounts Receivable' balance (so you know how much your customers owe you at any given time).
It is normal to record sales income at the point you issue the invoice, not when you receive the money. HMRC also uses this approach when calculating your personal or corporate income tax.
Cheers
