Is Accounts Receivable an Asset?

Here we will the answer the very basic question that “Is Accounts Receivable an Asset”?

Before giving the answer of this question, you must understand that assets are those resources which are owned by the business through Internal Sources (Capital, Shares, etc) and External Sources (Liabilities) that is called Equity.

And Also that there are two types of Assets:

1. Current Assets

2. Non Current Assets

You may also be interested in “Difference Between Liabilities And Owners’ Equity” , “Accounts Payable VS Accounts Receivable” And “Is Accounts Payable is an Asset”?

Now, come to the question that whether Accounts Receivable or Debtor is an asset or not. The answer is that Accounts Receivable is a Current Asset because it is the amount due from our customers for the goods sold on credit basis or services rendered by the business to customers on account. This amount received from the customers will provide benefits to the business in future in the Current Accounting Period or Accounting Cycle. Accounts Receivable is convertible into Cash very quickly so also classified under Quick Assets.

It important to note that it is possible that all amounts of goods sold on credit basis or services rendered by the business to customers on account may not be received by the business during the Current Accounting Period or Accounting Cycle, so Net Relizable Value of Accounts Receivable is obtained by deducting the Closing Balance of Allowance For Doubtful Accounts from Accounts Receivable in the Balance Sheet in order to give true and reliable information to Users of Financial Statements according to Generally Accepted Accounting Principles (GAAP) Matching Principle.

Example of Accounts Receivables are Goods Sold On Credit Basis to Customer to test the products before buy the full products, Services such as Internet Bills, Electricity Bills, Telephone Bills are charged at the end of month in order to offer the customer the ability to get benefit from these services before making the payment of bills.

So, it is all about the question “Is Accounts Receivable is an Asset”?