All I need to know about Accounts Receivable.
Accounts receivable is one of a series of accounting transactions dealing with the billing of customers which owe money to a person, company or organization for goods and services that have been provided to the customer. This is typically done in a one person organization by writing an invoice and mailing or delivering it to each customer.
On a business balance sheet, accounts receivable is the amount that customers owe the business. Aka AR, they are classified as current assets. To record a journal entry for a sale on account, 1 must debit a receivable and credit a revenue account. When the customer pays off the account, 1 debits cash and credit the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is always debit.
Companies that have become too big to perform this task by hand (even smaller companies that could but prefer not to do them by hand) will generally use accounting software on a computer to perform this task.
Associated accounting issues include recognizing accounts receivable, valuing accounts receivable, and disposing of accounts receivable.
Some additional types of accounting transactions include accounts payable, payroll and trial balance.
Since not all customer AR will be collected by the Accounts Receivable person, companies typically record an allowance for bad debts which is subtracted from total accounts receivable. Many debtors just won’t pay the AR; in those cases, smart creditors turn to a collection agency.
