Thursday, July 16, 2009

Accounts receivable

Accounts receivable is one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provided to the customer. The ending balance on the trial balance sheet for accounts receivable is always debit.

In most business entities this is typically done by generating an invoice and mailing or electronically delivering it to the customer called credit or payment terms. When the customer accounts receivable payments pays off their accounts, one debits cash and credits the receivable in the journal entry. 

An example of a common payment term is meaning payment is due in the amount of the invoice from the date of invoice. Other common payment terms include but could in reality be for any time period agreed upon by the vendor and the customer.

While booking a receivable is accomplished by a simple accounting transaction, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full time proposition. Depending on the industry in practice, can be received after the due date has been reached.

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