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Accounts Receivable
Accounts receivable represents the money owed by clients to an establishment for the sale of products and services, which must be paid within an agreed timeframe. It is commonly executed by generating an invoice and delivering it to the customer.
2,500 Questions
Why is aging of accounts receivable helpful in the collections of the accounts receivable?
Aging accounts receivable helps determine which customers owe you and for how long, which makes it easier to determine whether a customer needs just a simple reminder or needs their account to be written off as bad debt. In doing so, you can effectively determine who to be wary of lending to and who you can trust to repay you in an orderly fashion...
What transactions increase in one owner's equity equals decrease in another owner's equity?
Profits would increase owners equity, loss and drawing would decrease an owners equity.
Is bonds payable a liability account?
Bonds are the form of finance which a company issue to external investors to get finance for running of business and bonds are issued to raise capital to use for investment or daily operations as it is a long term debt that;s why it is the liability of the company to payback to original investors at specific future time for which debt is raised.
What decreases an asset and liability?
Decrease in asset means being using of it decreases and liability decrease means payable of debts decreases.
Which side of a receivables ledger control account is cash refund to customers?
If you are having to refund a customer money from an account receivable that means that
1. They overpaid on their account (or)
2. An entry error was made and they were over charged.
For example 1. Say Customer X paid you $500 on their account but only owed you $50. The original entry is going to give their AR a (credit balance) of $450. Because AR is an account receivable it maintains a Debit balance. To correct this and your company plans on paying them cash back (issuing a check), you will Issue the check for $450 and credit your cash account and debit their AR account. This entry will not effect revenue as it was an over payment and not actually recorded as Income.
If it's just an entry error, then simply correct it with an adjusting entry. Since the original entry is recorded as AR (debit) and Revenue (credit), reverse the entries for the adjustment amount noting why the adjusting entry was made. Since this was an entry error more than likely Income (revenue) was entered wrong as well.
False. It would be a benefit to both the customer and the company. This woul mean if the customer wants a discount from the supplier they would need to pay the invoice within 10 days to receive the discount, and this would then allow the company to receive their money quicker.
What does Terms - Net mean on an invoice?
I understand that "Net 30" means "due in 30 days" (Net15 & Net60 mean due in 15 or 60 days, respectively, etc), but sometimes invoices simply say "NET" with no number.
In my accounting classes (25 years or so ago) I was taught that "NET" means "NET 30", so I have always assumed this to be the case. Recently a vendor demanded payment for an invoice with "NET" terms that was less about 2 weeks old. He contended that "NET" means "due immediately"
Who's right?
What is the original book entry and their function?
original book entry refers to that book in which we maintain our daily records of the business .
in this book we record all the things in daily basis that is why its also called daily basis accounts.
What does payment terms before2 in 3 months due net mean?
"Payment terms before 2 in 3 months due net" typically means that the payment is expected to be made within three months, but a discount or favorable terms may apply if the payment is made before the two-month mark. The "net" indicates that the full amount is due without any deductions by the end of the three-month period. Essentially, it encourages early payment within a specified timeframe.
What is sundry debtor and sundry creditor?
If we provide some services to the vendors they are paying for our services therefore the person who are paying us becomes our sundry debtors.
What composes of current liabilities?
A liability shall be classified current when:
- The entity expects to settle the liability within the entity's operating cycle.
- The entity holds the liability primarily for the purpose of trading.
- Liability due to be settled must be within twelve months after the reporting period.
- The entity does not have the conditional right to defer settlement for at least twelve months after reporting period.
Reference: 2014 Edition, Financial Accounting Volume two
What steps would you take before approving invoice for payment?
Confirm that the merchandise or service was properly ordered (eg. a Purchase Order, or order placed by an authorized person), confirm that the merchandise was received on time and in good condition, confirm the vendor is approved.
What column does a dishonoured cheque in accounts receivable go?
what is the entry if i pay creditors with a cheque and the cheque is not honored
Why do credits increase liabilities and equity and decrease assets?
This is simply the fundamental part of double-entry accounting.
If we view the balance sheet as two sides, the left side contains all of a company's assets, while the right side contains all of the company's liabilities, as well as shareholders' equity/share capital and retained earnings.
An increase to the left side is a Debit, and a decrease is a Credit.
An increase to the right side is a Credit, while a decrease is a Debit.
If we were to purchase a building (part of Property, Plant & Equipment) with cash, our entry would be:
Debit PP&E (building)
Credit Cash
Because these are both asset accounts (left-side accounts), an increase to PP&E by buying the building is a Debit, and a decrease to to Cash buy using it to purchase the building is a Credit.
If we were to purchase the building, but instead of paying cash we negotiated with the seller and they accepted that we will pay them at a later date, the entry would be:
Debit PP&E (building)
Credit Accounts payable
The Debit entry is the same, while the increase in A/P (right-side account) is a credit because it is an increase in a liability account.
What is the difference between Sundry debtors And Sundry Creditors?
Sundry Debtors are from whom we have to take money and to sundry creditors we owe money.
What account type is accounts payable?
Accounts payable is a liability account. When something is purchased on account it falls under this category such as purchasing $10,000 worth of office supplies on account. You would debit the office supplies account under assets and credit accounts payable under liabilities.
What if a company cannot convert inventory into cash within one year - is it still a current asset?
yes.
What are the accounting entries for consumables of a retreading plant?
Understanding basic rules of accountancy is a necessary process and one should take trouble to go through the basic rules of accounting before starting professional course like tally. Otherwise latter on the user will be confused and will start seeking guidance here and there. one more post on how to start writing books of account will also help you to understand basic rules of accounting entries.
1)Individual Accounts
2)Goods/Assets Accounts and
3)Profit/Loss or Income/Expenses Accounts
In my last post, we have seen the classification of accounts under the above mentioned 3 broad categories.
This classification is very necessary to understand the rules of 'Debit or Credit' for any transaction.
here are the rules
A) Individual Accounts
In every individual accounts, there is two possibilities.
One is gainer and another is loss er OR
One is giving and another is receiving
the THUMB RULE IS THAT
Credit the person who is giving and debit the person who is receiving.
Suppose, you have given cash rs. 1000 to Mr. X, then in your books of account you have to "
Debit Mr. X Rs. 1000
Similarly In the books of account of Mr.X he will credit your account by Rs. 1000
For your kind information, the entry is not yet complete as we have seen only one rule yet.
B) Goods/Assets Account
This rule is very simple.
" Debit what ever comes in
Credit whatever goes out "
look to the above example cash is going out so, cash will be credited.
So, let's complete the above entry
Debit Mr. X Rs. 1000.00
Credit Cash Rs. 1000.00
Similarly in the books of account Mr. X will pass entry as follows
Debit cash Rs. 1000.00 (because cash comes to him)
Credit your account with your name
Similarly ABC and Company issues a cheque of Rs. 15000 drawn on bank of Baroda to Mr. bimal kumar then entries in the books of account of M/s. ABC & Co. will be as follows:
Debit Bimal Kumar Rs. 15000.00
Credit Bank of Baroda Rs. 15000.00
