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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
Is sales revenue a liability or asset?
Neither. Sales revenue is a P&L account, not a balance sheet account. When booking an entry to sales you would credit sales and either debit cash or accounts receivable.
What are some guidelines for file folder drawer arrangement?
Hanging folders are never labeled
Drawers follow the same order as your file plan
Folders must have guide cards & disposition control labels for each series
When applicable, labels must have the year written on them
Drawer exteriors must be labeled with enough info
Do you pay federal taxes on accounts receivables?
Not until they become part of taxable income.
A/R is a balance sheet item...not income statement.
A collection of account receivable will affect what account?
A collection for an account receivable will affect two accounts. Cash and the Account Receivable that it is related to.
For example, a customer has purchased a computer on account for $1500 and they pay you $500 towards the balance, the two accounts will be
Cash (db) $500
Account Rec-*customer name - (cr) $500
Not only did you receive cash, which increases your cash (debit) but the customer paid toward his account and it reduces the amount he owes (credit).
What are the steps involved in developing accounting information systems?
The system of collecting and processing transaction data and disseminating financial information to interested parties is known as the accounting information system. It includes each of the steps in the accounting cycle that you have studied in earlier chapters, the documents that provide evidence of the transactions and events, and the records, trial balances, work sheets, and financial statements that result. An accounting information system may be either manual or electronic.
To have an efficient and effective accounting information system (hereafter referred to simply as the accounting system), certain basic principles must be followed. These principles are:
1. Cost awareness. The system must be cost effective: the benefits obtained from the information disseminated must outweigh the cost of providing it. For example, the value of each accounting report should be at least equal to the cost of producing it.
2. Useful output. To be useful, information must be understandable, relevant,
reliable, timely, and accurate. Designers of accounting systems must consider
the needs and knowledge of various users so that the system's output (reports
and statements) will be useful to them. For example, sales managers
may need weekly reports of sales, and factory supervisors may need daily reports of production. Others with differing responsibilities (such as vice-presidents) may need such reports only monthly or quarterly.
3. Flexibility. The accounting system should be able to accommodate a variety
of users and changing information needs. The business environment changes
as a result of technological advances, organizational growth, increased competition,
government regulation, or changes in accounting principles, when
it does, the accounting system should be sufficiently flexible to meet the
resulting changes in the demands made upon it.
If the accounting system is cost effective, provides useful output, and has the
flexibility to meet future needs, it can provide a valuable service and make a
major contribution to both individual and organizational goals.
A Goods Received note is a document that is given when goods are taken into a company, store, or business. This is often a checklist to review before payment is made for the goods that have been received.
Do you close out accounts receivable?
Technically yes. Once a person or company pays off a balance owed to you (hence the account receivable) the books show this as a zero balance. Though the account is still on the books itself, the balance is zero and is closed. Keeping the actual account on the book is for future use if that person or company purchases from you on account again. For example. You sale computers and John purchased a $1500 computer on account. The original transaction is recorded as a sale with a debit recorded in accounts receivable-John. As payments are received, A.R. is credited and cash is debited until the A.R. is closed out.
Is a bank loan a long term liability?
That depends, how much is the bank loan, how long is the loan for. Most times YES it would be a long term liability.
One sure way of knowing whether it is long term or current. Long Term is a loan or payable that will not be paid off in one years time. Current is one that will be paid off in one years time or LESS!
Just remember
Current Liability -
Account Payable (short term) - 12 months or less
Long Term Liability -
Note Payable (long term) - 1 year or more
Note... Liabilities that are short term are listed under current liabilities, Current Liability is the Balance Sheet category for a Short Term Liability.
Is accounts receivable a financing activity?
no it is an operating activity since accounts receivable are the person who has to give us the money and the mmoney is from sales so it in an operating activity.
What transaction would cause decrease and increase liability account?
A liability account is money owed by a company. Such as Accounts Payable and Notes Payable.
A transaction that would increase a liability account is if you purchased an item on account. This would increase either the Account Payable or Note Payable accounts.
A transaction that would decrease these are actual payments you make to the person/company you owe, hence lowering the balance of how much is owed.
For example, I purchase a truck costing $15,000, that transaction has increased my liability in notes payable. Once I begin making payments on that truck, each of those payments will decrease the liability.
Is Accounts receivable is the opposite of accounts payable?
Accounts Receivable = money owed to YOU by another person or company
Accounts Payable = Money YOU OWE to another person or company
2 percent 10th prox-net 30 days?
We use this, which in our invoicing means our TERMS are
in the invoice is paid within ten (10) days you can deduct 2% from the total
but we expect the total within thirty (30) day. Some customers used the confusion
excuse to take the 2% when they paid in thirty days. We also, then said interested of
(X) would be added after 60 days.
If you debit a receivable what do you credit?
That depends on the type of receivable you are debiting. Debiting a receivable means that a person/company now owes you money for either a service rendered or some other type of purchase, perhaps even another reason. Credits for a sale of products and/or services generally are credited to such accounts as Sales,Income, Revenue.
However, if your company is disposing of a Fixed Asset and has sold this asset to another on account, then you will use such accounts as Gain or Loss on Disposal of Fixed Assets.
What i need to do for decrease account receivable?
Generally to decrease an account receivable you must receive a payment from the customer that owes on that account and then you credit the receivable.
It can become a little more complicated if the debt (receivable) is overdue and is now being considered noncollectable in which the Allowances for Bad Debts account will now be utilized.
What account would increase with a decrease in the inventory account?
The following will increase:
Expense and Revenue Accounts
Cost of Goods Sold - Credited
Sales Revenue - Credited
Balance Sheet Accounts
Assets Accounts
Accounts Receivable or Cash depending on payment terms will be debited
Nature of financial accounting?
The nature and purpose of accounting
The basic aim of accounting in a business entity is to provide financial information for making decisions on its activities. Managers of an economic entity at various levels require analyzed financial information for planning and programming, for controlling expenditure, for ascertaining the extent of profitability or otherwise of a department - even of each production item for undertaking new jobs, etc. Financial information in tabular forms and with graphs and charts are also required by the outsiders, namely, bankers, financial institutions, creditors, investors, government agencies and even by the labour unions and the general public who have some interest in the particular business concern.
Which of these best describes the invoice price of a vehicle?
the manufactures initial charge to the dealer
What does cash application means in accounting terms?
Cash Application process is a simple process,applying customer payments to open receivables .When done properly,it forms the corner stone of an efficient collections effort,providing an accurate representation of what customers truly owe you.when the cash app process breaks down,however,we lose time and efficiency that negatively impact on sales,cash flow and cost of capital.
Alphin Cheriyan
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What is an example of an asset increase and liability increase?
For eg. when you buy a plot (land) and you pay later to your supplier. So:
Tangible non current assets +
Suppliers (accounts payable) +
Why is capital a credit account entry in Accounting?
Double Entry Accounting's basic rule is, for every entry there must be an equal and opposite entry.
If a person invest $50,000 into his company in cash, Cash is debited showing an increase, while Capital is Credited, the opposite entry.
The accounting equation is
Assets = Liabilities + Owners Equity (Capital)
A better way of putting this might have been Assets - Liabilities = Owners Equity (Capital)
Which tells me, the OE (Capital) of any company is equal to what is left after all liabilities are subtracted (deducted) from the companies assets.
The transaction mentioned above would look like this
$50,000 = $0 + $50,000 A = L + OE
or
$50,000 - $0 = $50,000 A - L = OE
