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New accountants see customer balances that do not move in line with invoices and receipts, and cannot explain the closing figure.
The debtor ledger rises with each invoice and falls with each receipt, TDS credit, credit note and agreed deduction. Opening plus invoices less all settlements equals closing.
One ledger per customer, invoice references on every receipt entry, TDS booked to a TDS receivable ledger and checked against the TDS credit statement.
Customer balances that can be explained line by line, with doubtful amounts identified early.
Accounts receivable is money your customers owe you for goods or services sold on credit. Indian books show it under Sundry Debtors, a current asset, with one ledger for each customer. An invoice increases the balance; a receipt, TDS credit or credit note reduces it.
How does a credit sale become cash, and how do GST and TDS change what you collect?
- Invoice raised. You supply goods or services and issue a tax invoice with GST. The customer’s ledger is debited with the full amount, including GST.
- Credit period runs. The customer has, say, 30 or 60 days to pay.
- Customer deducts TDS where it applies. For payments such as professional fees or contract work, the customer deducts TDS before paying and deposits it with the government.
- Bank receipt. The customer pays the net amount by NEFT, RTGS, UPI or cheque.
- Settlement booked. You credit the customer’s ledger with the bank receipt and the TDS, and match both to the invoice.
GST makes the invoice bigger than your income. If you bill ₹1,00,000 plus 18 percent GST, the customer owes ₹1,18,000, of which ₹18,000 is tax you pass on to the government. TDS makes the cash smaller than the invoice, but you claim it against your own income tax once it shows in your TDS credit statement (Form 26AS for periods up to 31 March 2026, or Form 168 from tax year 2026-27).
A worked example: one customer’s ledger for a quarter
| Item | Amount |
|---|---|
| Opening balance on 1 July | ₹1,50,000 |
| Add: invoices raised in the quarter (including GST) | ₹2,36,000 |
| Less: bank receipts | ₹1,62,000 |
| Less: TDS deducted by the customer | ₹8,000 |
| Closing balance on 30 September | ₹2,16,000 |
Check: ₹1,50,000 + ₹2,36,000 = ₹3,86,000. Then ₹3,86,000 − ₹1,62,000 − ₹8,000 = ₹2,16,000.
If the accountant forgets to book the ₹8,000 TDS, the ledger shows ₹2,24,000 and the customer will dispute it. The TDS entry goes to a TDS receivable ledger, which you later tick against the customer’s entries in your TDS credit statement.
How is Sundry Debtors different from similar balances?
| Balance | What it is | Side |
|---|---|---|
| Sundry Debtors (accounts receivable) | Invoiced amount a customer owes | Asset |
| Bills receivable | A bill of exchange the customer has accepted | Asset |
| Customer advances | Money received before you invoice | Liability |
| Unbilled revenue | Work done but not yet invoiced | Asset |
A customer advance booked in the customer’s own ledger makes that ledger show a credit balance until the invoice is raised.
When does a debtor become a doubtful or bad debt?
There is no single day count in law. In practice:
- An invoice well past its due date, with no reply to reminders, is doubtful. Many businesses provide for amounts once they are over 180 days or 365 days old, depending on their policy.
- Companies following Ind AS 109 estimate expected credit losses on receivables, often with a table based on ageing.
- A debt becomes bad when recovery is no longer realistic: the customer has closed, is in insolvency, or the claim cannot be pursued. For income tax, a bad debt is generally allowed in the year it is actually written off in the books.
A debtors ageing report, which groups balances into 0 to 30, 31 to 60, 61 to 90 and over 90 days, is the usual tool for spotting these early.
What to read next
- What is a payment advice explains the note that tells you which invoices a receipt settles.
- What is cash application covers matching receipts to open invoices.
- Partial payment reconciliation in India handles receipts that settle only part of an invoice.
- For reconciling customer receipts and TDS balances, see account reconciliation software India.