Accounts receivable
Accounts receivable is one of a series of
accounting transactions dealing with the
billing of customers which owe money to a person, company or organization for
goods and
services that have been provided to the
customer. This is typically done in a one person organization by writing an
invoice and mailing or delivering it to each customer.
On a company's
balance sheet, accounts receivable is the amount that customers owe a business. Sometimes called trade receivables, they are classified as
current assets. To record a journal entry for a sale on account, one must
debit a receivable and
credit a revenue account. When the customer pays off their accounts, one debits cash and credit the receivable in the journal entry. The ending balance on the
trial balance sheet for accounts receivable is always debit.
Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use
accounting software on a
computer to perform this task.
Associated accounting issues include recognizing accounts receivable, valuing accounts receivable, and disposing of accounts receivable.
Other types of accounting
transactions include
accounts payable,
payroll, and
trial balance.
Since not all customer debts will be collected, businesses typically record an allowance for bad debts which is subtracted from total accounts receivable. When accounts receivable are not paid, some companies turn them over to collection agencies. However, many debtors still do not pay; in those cases, some creditors turn to collection attorneys.
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Accounts Receivable as Collateral
