Accounts Receivable Explanations

Accounts receivable is the name of the account where the increases and cuts linked to the sale of concepts other than products or services are recorded. This account is made up of bills of exchange, titles of credit and promissory notes in favor of the company.

Accounts receivable, therefore, grant the right to the organization to require the underwriters of the receivables to pay the documented debt. This is a future benefit credited to the account holder.

Accounts receivable are made up of promissory notes, titles of credit and bills of exchange.

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Types of accounts receivable

Among the accounts receivable, we can speak of accounts receivable from the client (when he takes credit with the company ) and accounts receivable from employees and officials (register salary advances and other criteria). Another distinction between accounts receivable is given by the time in which said credit can be converted into cash ( short-term accounts receivable, long-term accounts receivable, etc.).

In the latter case, it is interesting that we learn more about some nuance of this type of accounts receivable. Thus, for example, we could determine that the long-term ones are those that are identified by the fact that the availability they have is for more than one year. All this without forgetting that, at the time of filing, it is mandatory and necessary that it be done outside of what would be the set of current assets.

On the contrary, those previously mentioned and that receive the name of short-term accounts receivable are those whose availability is the one that occurs in a period of less than one year. It is also important to know that when the presentation process has to be carried out, it has to be done within what would be the current asset relative to the financial situation of the corresponding entity.

Accounts receivable reflect future benefits.

Part of the balance sheet

Accounts receivable are part of the general balance of organizations as part of their Credit or Credit, since over time they will become cash for the company.

In addition to everything that we have exposed so far, it is important to know that the accounts receivable process basically consists of two phases or fundamental pillars. On the one hand, there is what would be the billing, and on the other, the payments.

It is essential to be clear that these accounts receivable that concern us are important and require that the company have them perfectly noted and registered. For this reason, it is usual that, in many cases, it is decided to undertake audits in order to verify this action, which will carry out tasks such as verifying what the identity of bad debts would be.

Accounts receivable and sale on credit

The granting of products or services on credit is one of the tools that companies have to retain existing customers and attract new ones. These credits are reflected in accounts receivable, even when they present different conditions and forms of payment.

By managing accounts receivable, a company can streamline credit collection and analyze the cost-benefit of the modality.