Accounts receivables - Definition
Accounts receivable refers to the amount that a company is entitled to receive from its customers for goods or services sold on credit. In other words, it is the amount that your customer owes you with respect to contractual obligations.
Accounts receivables are also known as debtors, trade debtors, bills receivables or trade receivables.
Accounts receivables examples
On 1st June, 2021, Sid Enterprises sold goods worth 75,000 to Neon Traders with a credit period of 15 days. From 1st June to the date the bill is paid, 75,000 will be treated as accounts receivables against Neon Traders account.
Let’s say, on 10th Neon Traders paid 50,000 to Sid Enterprises. This will be reduced from Neon trader’s account. Post adjustment, the overall accounts receivable will be 25,000.
Likewise, when you sell on credit to different customers, it will be added to the overall accounts receivable and when you receive from the customers, it will be reduced.
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