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Here we will study about “Is Accounts Receivable Classified Under Liabilities And Equity ”. You may also be interested in “ Is Accounts Receivable An Asset ” The answer to this Accounting Question is that Accounts Receivable is neither classified under Liabilities nor Equity but, in fact, Accounts Receivable is a Current Asset o n Balance Sheet which is convertible into Cash very quickly. Accounts Receivable is the amount of debts due from customers against the goods or services sold on credit / account basis. For Example, if the entrepreneur sold goods worth Rs. 50000 to Mr. A on Credit Basis and Mr. A agrees to make payment for the goods after 30 days, then it is a Business Transaction and it is related to Sale of goods on credit basis. The Customer, Mr. A is Accounts Receivable for the entrepreneur while Sales is the revenue which the entrepreneur will earn when the customer, Mr. A makes payment on due date. When the customer, Mr. A ma...

Here we will study about the Modern Definition of Accounting . Accounting Definition By American Institute of Certified Public Accountants (AICPA) is very famous around the world as it describes the whole Process or Steps in the Accounting Cycle in which accounting exists in the business life of Smaller, middle and Larger Scale Compa nies or Corporations. These businesses include Sole Proprietorship, Entrepreneurship, Partnership, Companies, Organizations and Corporations. The Definition given by American Institute of Certified Public Accountants is shown below: “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the result thereof”. The above definition can be written in a summarized way (which is Modern Definition of Accounting) as shown below: “Accounting is the Art of Identif...

Previously, we studied about “ Is Accounts Receivable A Revenue ”, but here we will study about the very important and basic Accounting Question that is, Is Accounts Receivable Accrued Revenue” or Accounts Receivable VS Accrued Revenue. The fundamental difference between Accounts Receivable And Accrued Income existed with respect to Sales And Income. The Accounting Term “Accounts Receivable” is used in case of Sales of goods or services or Assets, Plants, Supplies, etc., and The Accounting Term, “Accrued Revenue” is used in case of Income. Goods or Services sold for the purpose of earning revenue is called Sales or it is the price of goods sold or services rendered to customers on Cash or Credit Basis, Accounts Receivable is also created in case of Sales of Assets, Plants, Supplies that are used in the business and not for resale purposes while For Accrued Revenue we are concerned in income that is the amount left after deducting all the relevant...

Previously, we studied about “ Is Accounts Receivable An Asset ” in Accounting but here we are concerned with the very basic Accounting Question that is, “Is Accounts Receivable A Revenue”?   The answer to this very simple Accounting Question is that Accounts Receivable is not revenue because Accounts Receivable is the amount of debt due from the customers within the specified Accounting Period or Accounting Cycle while Revenue is the price of goods sold or services rendered by the business to customers on Cash Basis or Credit Basis. Accounts Receivable is a Current Asset which is convertible into cash very quickly. Actually, According To Accrual Basis of Accounting , all revenues and expenses are recorded whether Cash is received or Not. So, all those revenues against which the company still not received the Cash Payment from the customers are Accounts Receivable. When the company actually receives the Cash from Customers, then these bec...

Previously, we studied about “ Is Accounts Payable An Expense ”, but here we are interested in another important and basic Accounting Question that, whether Accounts Payable A Revenue Or Not”? Then answer to this question is, “No”, because Accounts Payable is the the mount of debt payable by the business to outsiders (Suppliers, Banks, Other Financial Institutions, etc.) of the business while revenue is the price of goods sold or services rendered by the business to customers for Cash or Credit Basis. According To Accrual Basis of Accounting , “All Expenses and Revenues are recorded whether Cash is received or not”. So, we when revenues are not received by the business, then these are Current Assets For the business. Similarly, when expenses remain unpaid it is a Current Liability and when actually paid for Cash, then these are an Expense for the business. For Example, the company providing Internet Services are the revenues for the company but due t...

Previously we studied about the Cost Principle GAAP , but here we are concerned with Objectivity Principle GAAP. What Does Objectivity Mean in Accounting? According To Objectivity Principle “There should be factual and definite basis for the valuation of assets”. For Example, if an entrepreneur purchased land for business use, then there should be factual and definite basis for the valuation of the cost of the land. The estimated market’s value of land is not the definite or factual value so this value is not objective, because the market’s value is constantly changing. In Accounting, Objectivity means that the information presented in Financial Statements And Reports must be free from any influence that makes it biased. There is no Conflicts of Interests which means no interested party tries to get their own benefits by influencing the information presented in Financial Statements and Financial Reporting. To do ...

Here we discuss about Cost Principle that is one of the Generally Accepted Accounting Principles (GAAP). The Cost Principle states that assets should be recorded or valued at cost initially. It does so to show historical cost of the assets at balance sheet of the business when the asset was purchased for the first time of the company history. However, t his pri nciple restricts t h e compa ny to s how o nly  origi nal cost . So, for a compa ny  it does not mean that a compa ny always follows  t his pri nciple of GAAP  a nd  s hows   assets at cost o nly .  The Entrepreneur may record assets at other than  historical  cost to show on balance sheet. According To Cost Principle, the cost value will become the basis for the valuation of the assets. For Example, if the market value of the asset is increased or decreased, then the assets can be revalued at the market value. For Example if a busine...

Here we discuss about the difference between Expense Recognition Principle and Matching Principle and both of these principles are included in Generally Accepted Accounting Principles (GAAP). Expense Recognition Principle states that expenses should be recorded when incurred whether the cash is paid or not. Matching Principles states that all the expenses incurred for generating revenue must be matched with that particular revenue. Because in Expense Recognition Principle we record the expenses when these are incurred whether the cash is paid or not i.e., it also involves a Credit Transaction alongwith a Cash Transaction, therefore, we focus only on the recording of expenses. For Example, Rent paid for Rs.5000 on Account are recognized as expense whether the cash is paid or not. While in Matching Principles, we set off the revenues with the expenses incurred for earning that revenue. For Example, On 1 st March, 2017 Rent Paid For Rs.5000 on Account...

Revenue Recognition is the principle included in GAAP (General Accepted Accounting Principles). Revenue from the sale of goods should be recognized when all the conditions are fulfilled and if any one of them is failed, then it can not be considered as revenue for the company's businesses. ü   The entrepreneur transfers the risks and rewards of ownership to  the buyer. ü   The entrepreneur can not retain the managerial power relating to ownership of goods and also, he / she should not have effective control over the goods sold to buyers. ü   The amount or price of revenue can be measured reliably. ü   The economic benefits associated with the   Business Transactions   should flow to the entrepreneur or enterprise. ü     The amount of cost can be measured reliably. However, it is to be noted that the seller can retain the ownership of goods d...