If you credit AR what account gets debited If you sell it to

If you credit AR, what account gets debited? If you sell it to a collection agency you debit the AR? Doesn\'t debiting the AR increase it? How would the balance due you be increased by selling it to a collection agency?

Solution

If we credit Accounts Receivables, one or more of the following accounts may be dibited

Cash account or

Discount account or

Sales return accounts.

Credit of Accounts Receivale account is a deduction from Accounts receicable account.

If we sell AR to a Collection agency then we Credit Accounts Receivable Account and Debit Cash Account along with Interest expense to be paid to collection agency.

Yes Debiting the AR will increase AR balance.

The Balance of AR is Decreased when we sell AR to a Collection Agency. It will not Increase.