On credit, both chairs — AR and AP lifecycles
Same $900 job, two chairs. As the SELLER: the studio finishes work and collects 30 days later. As the BUYER: the studio receives a $900 supply order and pays 30 days later. Journalize each chair's two-entry lifecycle.
The journal entry
Finish the $900 job (payment in 30 days)
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | $900 | |
| Service Revenue | $900 |
30 days later — the check arrives
| Account | Debit | Credit |
|---|---|---|
| Cash | $900 | |
| Accounts Receivable | $900 |
- Accounts Receivable (debit): An IOU in your favor — an asset from the moment the work is done.
- Service Revenue (credit): Recognition follows the work.
- Cash (debit): The claim becomes cash.
- Accounts Receivable (credit): The IOU is settled and leaves the books.
Remember this
- formula
Both lifecycles are two entries: BIRTH (earn→AR+Revenue, or receive→Asset/Expense+AP) then SETTLEMENT (Cash↔AR, or AP↔Cash). Settlement never touches income.
- mnemonic
Your AR is someone's AP — every credit sale is a mirror-image pair of entries on two sets of books.