Accounts Receivable, What Is It?
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 company's balance sheet, accounts receivable is the amount that customers
owe a business. Sometimes called trade receivables, they are classified as
current assets. To record a journal entry for a sale on account, one must debit
a receivable and credit a revenue account. When the customer pays off their
accounts, one debits cash and credit the receivable in the journal entry. The
ending balance on the trial balance sheet for accounts receivable is always
debit.
Business organizations which have become too large to perform such tasks by hand
(or small ones 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.
Other types of accounting transactions include accounts payable, payroll, and
trial balance.
Since not all customer debts will be collected, businesses typically record an
allowance for bad debts which is subtracted from total accounts receivable. When
accounts receivable are not paid, some companies turn them over to collection
agencies. However, many debtors still do not pay; in those cases, smart
creditors turn to a
collection agency.
Source: Wikipedia
