What is Accounts Receivable?
Accounts Receivable Definition
Here we will study “What is Accounts Receivable?” or Define Accounts Receivable In Accounting.
Accounts Receivable / Sundry is the amount which is due from customers against the goods sold or services rendered by company to customers on account. They are also called in short words as "Receivables". Basically, the term "Receivables" refers to the amount due from individuals customers or companies for the goods sold on Credit Basis.
For Example, if the Company ABC sold goods worth Rs. 50000 to customer Mr. A ( Accounts Receivable) On Credit Basis, then Mr. A is the Accounts Receivable or Debtor is for the company
from whom the payment (Rs. 50000) will be received within the Specified Accounting Period or Accounting Cycle.
As, Accounts Receivable is the Current Asset, so we debit it as it increases and credit it when it decreases.
From the above example, we know there are two accounts involved in Business Transaction. One is Accounts Receivable and other is Sales. Following Accounting Journal Entry is Passed in the Book of Company as shown in the below:
Accounts Receivable a/c 50000
Sales a/c 50000
(Goods Worth Rs. 50000 Sold To Customer (Mr.A) On Credit)
Accounts Receivable is Debited By Rs. 50000, as it is increasing. Sales is also increasing by Rs. 50000, so we credit it.
The Term Accounts Receivable is used In American Accounting System while in British Accounting System, the term Debtor is used in the world of Accounting.
Accounts Receivable is a Current Asset so it is recorded on Asset Side. The Closing Balance of Accounts Receivable is Calculated at Net Realizable Value by deducting the Closing Balance
of Allowance For Doubtful Accounts.
You may also be interested in Accounts Receivable Journal Entries With Example In Accounting And Accounts Receivable Turnover Ratio.
So, it is all about “What is Accounts Receivable?” in Accounting.
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