Receivables
Definition:
Receivables are accounts receivable, amounts due from customers for goods sold or services rendered on credit. They are current assets that represent amounts that are owed to the company by its customers.
Types of Receivables:
- Accounts receivable: Amounts due from customers for invoices or bills issued.
- Open accounts: Accounts with customers where payments are made on a regular basis, such as monthly or quarterly installments.
- Notes receivable: Written instruments issued by customers to the company as evidence of debt.
Accounts Payable:
Accounts payable are amounts due to suppliers or creditors for goods or services received. They are current liabilities that represent amounts that are owed to others.
Journal Entries:
- Accounts receivable journal entry: Debit accounts receivable, credit sales revenue.
- Accounts payable journal entry: Credit accounts payable, debit purchases or accounts payable expense.
Accounting Treatment:
- Accounts receivable are recorded at their current market value or face value.
- Bad debt expense is recorded when an account receivable is deemed uncollectible.
- Accounts payable are recorded at their current value.
- Accounts payable are paid off when they become due.
Uses of Accounts Receivable:
Importance:
- Accounts receivable are an important part of a company’s cash flow and accounts payable management.
- They provide a source of liquidity and can be used to finance operations.
- Accounts payable are essential for maintaining relationships with suppliers and creditors.
Additional Notes:
- Accounts receivable and accounts payable are two important accounts in the accounting equation.
- Accounts receivable are typically classified as current assets, while accounts payable are typically classified as current liabilities.
- The turnover of accounts receivable and accounts payable measures how quickly a company collects its accounts receivable and pays its accounts payable.
FAQs
What do you mean by receivables?
Receivables refer to money that a company is owed by its customers for goods or services delivered but not yet paid for. They represent a company’s claim to future cash payments, commonly recorded as accounts receivable.
What is an example of receivables?
An example of receivables is when a company sells products to a customer on credit. The amount the customer owes to the company is recorded as an account receivable until it is paid.
What is the best definition of accounts receivable?
Accounts receivable is the amount of money a business expects to receive from its customers for sales made on credit. It is recorded as a current asset on the companyโs balance sheet.
What are receivables and payables?
Receivables are amounts owed to a company by customers, while payables are amounts a company owes to its suppliers or creditors. Receivables represent future cash inflows, and payables represent future cash outflows.
