Question

What is an account receivable, and how is it different from an account payable? Discuss some of the main accounting issues involved in accounting for accounts receivable?.

Answer 1

Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivables are listed on the balance sheet as a current asset. AR is any amount of money owed by customers for purchases made on credit.Accounts receivable are the current assets of the company.When the amount is not recoverable it will be written off after considering the credit factors.

When a company owes debts to its suppliers or other parties, these are accounts payable. Accounts payable are the opposite of accounts receivable.Accounts payable are the liability of the company to the supplier, for purchases on credit.

The three accounting issues associated with accounts receivable are listed below.

Recognizing – When to recognize revenue as Accounts Receivable.Thats is the using of accrual concept for credit sales.

Valuing – How to estimate the Accounts Receivable balance.This deals with adjusting the account with collections and sales made to arrive at the reporting balance.

Disposing – How to write off an amount as uncollectible.It includes finding the unrecoverable amount and writing off as per the norms of the company.