Journal entry for unapplied customer cash
Illustrative company · Accrual basis · USD · November – December 2026
The worked example
On November 30, 2026 a customer with 3 open invoices sends $5,000 and no remittance advice. The receipt is booked against the customer as unapplied cash. The next morning a subset search finds the only combination of its invoices that sums to it exactly, INV-1006 and INV-1007, and the customer confirms.
Transaction · November 30, 2026
JE-1 30 Nov 2026 Manual posted
Book the receipt against the customer, unapplied.
Read-onlyBalanced
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 5,000 US Dollar | |
| 1100 Accounts receivable | 5,000 US Dollar | |
| Totals | 5,000 US Dollar | 5,000 US Dollar |
Why it is booked this way
The money is the customer's payment for something they owe, so it reduces their receivable the day it lands, even before anyone knows which invoice. The control account is right at once; only the subledger waits.
Matching it is a search, not a guess: which of the payer's open invoices add up to exactly what arrived. A unique exact match is strong evidence, and the customer's confirmation is the proof.
Common mistakes
- Crediting revenue or a suspense account because the invoice is unknown.
- Applying one customer's payment to another customer's oldest invoices.
- Leaving it unapplied past month end, so the aging overstates what is past due.
Questions
- Is unapplied cash revenue?
- No. It reduces what that customer owes. Only if it leaves the customer with a net credit balance at period end is it reclassified to a liability.
- How do I find which invoices a lump sum paid?
- Search the payer's open invoices for a combination that adds up to the payment exactly, then confirm it with the customer before relying on it.
Terms on this page
The lessons that teach this
From the free founder back-office course: each lesson is taught on one company's books, with the authority behind every rule.
- What accounts payable is: procure to payAccounts payable is what a company owes its vendors for bills received. Here it is on Northwind's first bill, from purchase order to payment.9 min
- AP aging and days payable outstandingNorthwind's AP aging at September 30, why it must tie to the balance sheet, and its DPO of 10.6 days read with care.8 min
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Which invoices make this deposit?Find which open items add up to a deposit, to the cent. Put your own figures in and get the schedule behind this entry.
- Accounts receivable, explained for foundersMoney customers owe you for work you've delivered and invoiced but haven't been paid for yet. It's an asset.
- Journal entry for a customer short paymentDebit Cash for what arrived and credit Accounts receivable for the same amount. If the deduction is agreed, issue a credit note: debit Sales returns and allowances, credit Accounts receivable. If it is not, leave the difference open on the invoice, marked disputed.
- Journal entry for a sale on accountFor a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.
- Journal entry for a Stripe payoutBook charges gross: debit Stripe clearing and credit Revenue for every charge, and debit Sales returns and allowances and credit Stripe clearing for refunds. When the payout lands, debit Cash for the payout and Merchant fees for the fees, and credit Stripe clearing, which should then be zero.
- CashApplicationThe highest-value screen in AR. Every case is a first-class path.
- PaymentSuggestionInvoice combinations summing exactly to a lump sum.
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information, not tax, legal or accounting advice. Check with a CPA before you act on it.