Learning The Basics Of Accounts Receivable
Image source: fortiviti.com Accounts receivable is an account that represents the amount of revenue a company has earned but has not yet collected. It is the side of accounting that should have its own department in a business, with dedicated resources toward maintaining, monitoring, and collecting these accounts. Some businesses, however, have failed not because they were not profitable but because they were not collecting on sales, resulting in their cash flow being inadequate. Companies that sell products or supplies to buyers on account generally maintain a balance in accounts receivable. When new sales are made, there is an increase in the balance; when debts are paid, the balance decreases. Sales on account are regarded revenue at the time they are made in accrual-based accounting. When a company makes a sale on account, the balance increases. Cash balance is debited or increased when payments are collected. This is different from accounts receivable where i...
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