What is Accounts Receivable for Business?

What is Accounts Receivable for Business?

What is accounts receivable for business?

By definition: Accounts receivable is a balance due from a debtor on a current account. (MerriamWebster.com).

In the last blog I wrote about accounts receivable so here I will write about accounts receivable to distinguish the two.

Creating accounts receivable and accounts payable entries updates your accounting books and keeps track of your incoming and outgoing money.

Accounts receivables are listed on the balance sheet as a current asset. Accounts Receivable is any amount of money owed by customers for purchases made on credit. Basically, any unpaid invoices define accounts receivable of a company.

Accounts Receivable management is an integral part of a company’s accounting practices. Business owners create accounts receivable entry when they offer credit to their customers. Since AR is money owed to the business, it is considered an asset.

To keep track of the asset, record the amount as a receivable in your accounting books. Assets are increased by debits and decreased by credits.

When you make a sale but do not collect payment, you need to make an entry that shows how much money is owed to you.

Accounts Payable Vs. Accounts Receivable

To recap, you need to know the difference between accounts payable and accounts receivable entries.

Accounts Payable is:

  • Money you owe to vendors
  • A liability
  • Increased by a credit and decreased by a debit

Accounts Receivable is:

  • Money owed to you
  • An asset
  • Increased by a debit and decreased by a credit

Creating accounts receivable and accounts payable entries updates your accounting books and keeps track of your incoming and outgoing money.

Sometimes the customer takes too long to pay, which can cause many business owners to lose sleep at night worrying about AR.

Here at Accounting District we offer these services to you at a very affordable rate. Let us spare you the loss of sleep, time, and headache.

Contact us today for a free consultation!

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