Below are general guidelines for determining if revenue and accounts receivable need to be recorded. Each unit or department should have written procedures that identify how revenue generating activities are monitored for the need to record/monitor accounts receivable.
IDENTIFY revenue generating activities, such as providing goods or services.
DETERMINE if payment was received at the time when the revenue generating activities occurred. If yes, no account receivable is needed. If no, an account receivable needs to be recorded.
GENERATE an invoice for the goods or services provided through a billing system (PeopleSoft, third party processor, other database or software). Billing in PeopleSoft will record the revenue and account receivable in the general ledger. Other methods of billing will have to be recorded in PeopleSoft by journal entry.
RECORD the revenue and account receivable in the general ledger (PeopleSoft) by journal entry, debiting the appropriate accounts receivable account (asset) and crediting the appropriate revenue account.
RETAIN supporting documentation for the account receivable. Supporting documentation is verification that the revenue generating activities occurred and payment is due.
DETERMINE if a reserve account for any accounts receivable not collected within 30 days is needed. It is customary to use past experience, payment sources or industry guidelines as a benchmark to establish a percentage of accounts receivable that will not be collected. All receivables should be collected within 30 days.
MONITOR the accounts receivable for collection. Once collected, remove the account receivable by debiting cash and crediting the accounts receivable account. Accounts not collected are to be reviewed to determine the need for a write-off. If a reserve account is established the entry is to debit Reserve Account / credit Accounts Receivable. If no reserve account, the entry is to write-off directly to bad debts, debit Bad Debt expense / credit Accounts Receivable.
Record retention: Keep supporting documents per University Records Program or Sponsor Record Retention Policies, whichever is longer. Generally, the retention policy for non-sponsored Programs is three years. For sponsored programs, refer to the specific agreement.
The flow charts provided in this policy will assist in the process of identifying the need to record an account receivable and the need to write-off an account receivable.
ESTABLISH A RECEIVABLE
MONITOR A RECEIVABLE