That the actual condition of these accounts may be shown on the general ledger, it is the better practice to carry two accounts, representing live and delinquent accounts. Installment sales should be charged to an Installment Accounts Receivable account, and payments credited to the same account, which then becomes a general ledger controlling account of the live accounts in the installment ledger. Another account should be opened in the general ledger under some such caption as Installment Accounts Delinquent. When accounts become delinquent, they should be transferred by journal entry to this account. The journal entry would be:
Installment Accounts Delinquent
Installment Accounts Receivable
This transfer may be made daily, weekly, or monthly, but the period between transfers should never be longer than one month. Delinquent accounts may be indicated in the installment ledger by placing a metal tab of some distinctive color on the ledger sheet or card, or they may be segregated by transferring them to a special delinquent binder or file.
Fig. 26. Daily Report of Installment Accounts for the Credit Man
When a payment is received on a delinquent account, that account immediately becomes live, and the amount should be transferred by journal entry to Installment Accounts Receivable. The journal entry would be:
Installment Accounts Receivable