# Subsequent Receipts Testing for Receivables

- Author: PreciseBankFlow (https://www.precisebankflow.com)
- Published: 2026-09-12
- Updated: 2026-09-12
- Category: Bank statements in an audit
- Canonical: https://www.precisebankflow.com/blog/subsequent-receipts-testing

> How subsequent receipts testing supports receivables: trace post year-end deposits to invoices, handle partial payments and know when to confirm instead.
Subsequent receipts testing supports a year-end receivable by finding the customer's payment after the balance sheet date and tracing it to the specific invoices that made up the balance. A receipt that pays an invoice outstanding at year end is strong evidence the receivable existed. Unpaid, partly paid or oddly paid balances need more work.

## What does subsequent receipts testing prove about receivables?

Subsequent receipts testing shows that a customer owed the money at year end, because the customer later paid it. That supports existence, and it supports valuation for the part that was collected. It says little about completeness, since a receivable the client never recorded will not be selected, and nothing about balances still unpaid when the testing stops.

### The logic of the test

A customer rarely pays an invoice it does not owe. If an invoice dated December 12 for 18,400.00 is on the year-end aging and a payment of 18,400.00 referencing that invoice arrives on January 20, the receivable was real. The evidence comes from outside the client, through the bank, so it carries more weight than the client's own sales records alone.

### The limits of the test

Three limits are worth stating in the workpaper:

- **Cutoff.** A receipt in January proves an amount was owed, but not that the sale belonged in the old year. A December invoice for goods shipped in January is still a cutoff error, paid or not.
- **Unpaid balances.** Anything still unpaid at the end of your testing window gets no support from this test.
- **The source of the cash.** The test assumes the money came from the customer. If it came from someone else, the evidence weakens sharply.

Bank records are only as good as the route they reached you by. [How reliable bank statements are as audit evidence](/blog/bank-statements-as-audit-evidence) depends on whether the auditor got them from the bank or from the client, and that applies to the January statements used here.

## Tracing post year-end deposits to specific receivables invoices

Trace each selected customer balance forward: from the aging to the cash receipts journal, from the journal to the remittance advice, and from the deposit to the bank statement. It is complete only when the bank shows the money arriving and the remittance names the invoices paid. A journal entry alone is the client's word, not evidence of payment.

Work each selected balance through these steps:

1. Take the customer's year-end balance from the aged receivables listing, broken down by invoice.
2. Find receipts from that customer in the cash receipts journal after year end, up to the end of your testing window.
3. For each receipt, get the remittance advice, the customer's check copy or the payment detail from the processor.
4. Agree the receipt to a deposit on the bank statement, by date and amount.
5. Match the remittance to the invoices on the year-end balance. Mark which invoices were paid in full, in part or not at all.
6. Note anything the receipt paid that was not on the year-end balance, such as a January invoice.

### Deposits that hold many receipts

Bank deposits are often batches. A single deposit of 46,000.00 may contain six customer checks, or a lockbox file with dozens of payments. Get the deposit detail from the bank or the lockbox report and agree the specific customer's amount within it. A deposit total that merely exceeds the customer payment proves nothing about that customer.

### Choosing the testing window

The longer the window, the more balances get support, but the later the audit finishes. Many teams test receipts for several weeks after year end and extend the window for large balances that remain unpaid. Write the window and the reason for it in the workpaper.

## Worked subsequent receipts testing schedule for five customer balances

The schedule below shows five selected balances traced to receipts through February 15. The customers, invoices and figures are invented for this example and do not come from a real client.

| Customer | Year-end balance | Invoices on the balance | Receipt date | Bank deposit agreed | Applied to year-end invoices | Unsupported | Conclusion |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Harbor Tools | 18,400.00 | 1 invoice, Dec 12 | Jan 20 | Yes, single check | 18,400.00 | 0.00 | Supported |
| Lindqvist Farms | 32,750.00 | 3 invoices, Nov 28 to Dec 21 | Jan 11 and Feb 3 | Yes, two ACH credits | 32,750.00 | 0.00 | Supported |
| Corvid Media | 12,000.00 | 2 invoices, Dec 5 and Dec 30 | Jan 26 | Yes, lockbox batch | 6,000.00 | 6,000.00 | Dec 30 invoice disputed; inquire |
| Pell Logistics | 41,200.00 | 1 invoice, Dec 31 | Jan 9 | Yes, wire | 41,200.00 | 0.00 | Supported; check shipping date for cutoff |
| Ostrander Group | 9,800.00 | 1 invoice, Oct 14 | None by Feb 15 | No | 0.00 | 9,800.00 | Unpaid; confirm or test allowance |

### Reading the schedule

Harbor Tools and Lindqvist Farms are clean. Corvid Media paid one invoice and short-paid the other, so half the balance is unsupported until the dispute is understood. Pell Logistics paid in full, but an invoice dated the last day of the year needs a shipping document check before anyone relies on it, because payment does not fix cutoff. Ostrander Group's invoice is old and unpaid, which raises a valuation question about the allowance for doubtful accounts.

Of the 114,150.00 tested, 98,350.00 is supported by subsequent receipts and 15,800.00 needs other evidence.

## Partial payments, lump sums and credits in subsequent receipts

A receipt that does not match one invoice has to be allocated before it can support anything. Use the customer's remittance advice as the authority on which invoices were paid. Where the remittance is missing, apply the receipt as the client's terms or the customer's history suggest, and treat any amount you cannot allocate as unsupported.

### Partial payments

A short payment can mean a dispute, a deduction for damaged goods, a volume rebate the client did not record, or a customer in cash trouble. Each has a different effect on the receivable. A dispute may call for a credit note. An unrecorded rebate means revenue was overstated. A cash problem is an allowance question. Ask the client which applies, and look for the credit note or correspondence.

### Lump-sum payments

Some customers pay a round amount on account with no remittance. If 25,000.00 arrives against a balance of 31,900.00 made up of four invoices, the payment cannot be tied to any one invoice. The usual practice is to apply it to the oldest invoices first, matching how most clients age their ledgers, but record that this is an allocation, not evidence from the customer.

### Credits and offsets

A balance can also fall through a credit note, a returned item or an offset against an amount the client owes the same customer. None of these is a receipt. A credit note issued in January against a December invoice suggests the sale was overstated at year end. Track credits separately from cash so the schedule does not count them as support.

### The same receipt twice

When customers pay by more than one channel, the same payment sometimes gets recorded twice: once from the lockbox file and again when someone keys the check copy. Applying the duplicate would overstate the support. [Finding duplicate transactions on bank statement lines](/blog/finding-duplicate-transactions-on-bank-statement-lines) covers how to spot one. PreciseBankFlow flags possible duplicate lines and matches statement deposits to the ledger, which helps confirm that each receipt you rely on reached the bank once. Concluding on the balance is still your call.

## Subsequent receipts that should not count as evidence

A receipt is evidence only if it came from the customer, in settlement of the year-end invoice, and stayed paid. Receipts from a party related to the client, payments that reverse after you test them, and receipts for sales made after year end can all look like support and prove nothing. Check for each before you tick the row.

### Receipts from related parties

If the payer is an owner, a director, a sister company or a business they control, the payment may simply be the client's own money going round. A related party can pay a fictitious invoice to make it look collected. Compare payer names and bank account details on receipts against the client's list of related parties. [Related party transactions in bank statements](/blog/related-party-transactions-in-bank-statements) covers how they show on the statements and how to find payers who are not on the list.

### Payments that reverse

An ACH credit can be returned and a check can bounce. A receipt that clears in January and reverses in February supports nothing. Read the bank statements for the whole window, not just the day of the receipt, and look for returned items against the same customer. The reverse risk also exists on the client's side: unauthorized debits pulled from the account. The difference between an [ACH debit block and an ACH debit filter](/blog/ach-debit-block) explains the control that stops those.

### Receipts for new sales

A customer that pays its January invoice in January has not paid the December one. Match receipts to invoice numbers, not to customer names and round dates. A rolling balance where each payment clears the newest invoice can hide an old, uncollectible one, which is the pattern behind lapping.

### Receipts in a different name

A payment from a name that differs from the customer, such as a parent company or a factoring agent, can be genuine. Get the remittance and a reason before you rely on it.

## When should you confirm receivables instead of testing subsequent receipts?

Confirm receivables when they are significant and a reply from the customer is the stronger evidence. Under PCAOB standards confirmation of significant receivables is presumed, and subsequent receipts testing is mainly an alternative when a confirmation goes unanswered. For audits under other standards, follow the firm's methodology on the same question.

The [PCAOB's 2023 AS 2310 confirmation standard, as filed with the SEC and published in the Federal Register](https://www.govinfo.gov/content/pkg/FR-2023-10-17/html/2023-22491.htm), keeps the presumption to confirm receivables. It also gives "examining subsequent cash receipts, including comparing the receipts with the amounts of respective invoices being paid" as an example of a procedure that supports confirmation evidence. That matches how many teams use the test: as the alternative procedure for nonresponses, and as a supplement where negative confirmations were sent.

### When receipts are the better choice

- **Customers that do not answer confirmations.** Some large customers and public bodies decline to answer. Receipts give external evidence anyway.
- **Many small balances.** Where confirmation response rates are poor, receipts may cover more of the balance.
- **Fast-paying customers.** If most of the balance is collected within a month, receipts testing is quick and the evidence is strong.

### When confirmation is the better choice

Confirm when the balance is large, the customer is new, the terms are unusual, or there is a fraud risk around revenue. A confirmation can also cover terms, side agreements and disputed amounts, which a receipt cannot. Where the year-end balance looks inflated, a direct reply from the customer is the evidence that settles it.

If you want statement deposits matched to the ledger before you trace them to invoices, [PreciseBankFlow](/get-started) is opening to audit firms in small groups.