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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
Invoices shall be kept upto a period of 6 years as required by the Income Tax Act, 1961 to maintain books of accounts and other supporting documents upto a period of 6 assessment years..
an asset
Write short note on cash based accounting?
Cash Method Accounting This kind of accounting is used when you want to report income and earnings during the period of fiscal accounting. For legal and government entity, September 30 is time of filing and the rest of the companies; it is the end of the year. Cash based accounting means that when you receive the money the sales are recorded right away. The expenses is also recorded when they are paid. Cash based method is good if your income is less than one million and you instantly collect money for your product and service. Ironically the government used this method even if they earn more than trillion dollars. If you choose cash based method accounting, there are a lot of benefits that go with it. Assess first your business because if cash based method can fit your process then you can save money from book keeping. If you don't maintain an inventory or you don't have customer accounts, then cash based method is a good choice because it much cheaper. With this method you can see right away if your business is becoming profitable. Cash based accounting is a very simple method but it can only record cash transactions and doesn't take note about everything else. It can never work for businesses who doesn't credit or offer credit. If your business is not keeping inventory then this is a good choice. With this kind of accounting, there are no account receivable and account payable.
What is payment terms of 2 percent 15th prox net 25?
Usually 2 % 15th prox net 25 means, if you pay by the 15th of the following month you can take a 2% discount, net 25 means the full amount is due by around the 25th of the month.
Many companys offer this small discount to customers to encourage to pay early. 2% may not seem like much, but if you are a company, buying from another company and spending thousands of dollars, 2% can add up to be a HUGE savings.
Prox stands for Proximo meaning Of or in the following month
What will decrease an asset and increase liability?
You cannot just decrease an asset and increase a liability without affecting equity since Assets = Liabilities + Equity. And since you want to find a situation where liabilities increase and assets decrease, you will need to decrease equity by the absolute value of both changes (ie -6 + 5 = 11). So, if Assets decrease by 5 and Liabilities increase by 6, then equity needs to decrease by 11 to keep the equation in equilibrium. Essentially this means that the journal entry will require some type of expense that is only partially paid.
For example, if you buy a $10 widget and incur and expense immediately but only pay for half of it immediately then your journal entry will be:
Dr. Widget expense 10
Cr. Accounts payable 5
Cr. Cash 5
Assets decrease, and Liabilities increase. The trouble you were having was not recognizing the need for the equalizing equity account.
Why adjusting entries are prepared give some reasons?
Adjusting entries have to be made because a company's assets, expenses, and liabilities never stay the same from one accounting period to another. I will try to give you at least two examples of why adjusting entries must be made.
Example 1.
A customer purchases items on account for the amount of $500. When the sale is first made the company records this transaction in sales and accounts receivable. Let's just say it's the end of the month and the customer pays $250 on the amount she owes. The company must then make the adjusting entries to show that not only did they receive the money, but to show that the customer paid. An adjusting entry for the $250 will be made to CASH and the appropriate Accounts Receivable.
If the company did not make this adjusting entry, then the books would show them as not having collected any money from the customer and not only would the customers account be incorrect, the Cash balance for the company would be off.
---- Example 2.
A company pays for 12 months insurance. Each month part of what they paid expires, they have to make adjusting entries to this as each month of insurance expires to show that they have used that amount. Say the company pays $480 a year, each month $40 of that would expire (or be used up), the company must make adjusting entries to show that this has occurred or their Prepaid insurance account and expenses will not reflect what the company has actually done.
This is really odd for me to see, usually when a company uses "prox" it's for dates, such as 1-30 (days of the month).
From what I've seen however, Prox 45, may mean that the payment is due with-in 45 days of the invoice date. Prox standing for Proximo, which literally means, Of or in the following month {or} in or of the next month after the present; "scheduled for the 6th prox"
What does prox 25 mean in pay terms?
prox is short for Proximo, meaning in or of the following month. Generally speaking prox 25 usually means payment is due on the 25th day of the following month.
For example, you receive your bill/invoice dated October 15, the payment is due before or on November 25.
Should every income have a corresponding asset?
For the first entry, yes, pretty much. If a company receives money from Income that is recorded as income and cash, cash being the asset account. If the company records the income as a recievable, meaning the customer hasn't paid yet, then the account would be an Accounts Receivable, also an asset account.
Though income is recorded on the Income Statement and not the Balance Sheet, the revenue from said income becomes an asset, adjusting entries later on the books will take care of anything else, such as merchandise, inventory, cost of goods sold (if a merchandising company) or other expenses related to said income.
Why does a balance sheet tally?
The balance sheet is a simple and at the same time very complex and detailed account of the company. The balance sheet shows the amount of assets a company holds, it shows the company's liabilities, or what they owe for one reason or another (not monthly expenses) and what the owners or stakeholders have in the company. Remember the accounting equation.
Assets = Liabilities + Owners Equity
Or it could also be stated
Assets - Liabilities = Owners Equity
Written this way makes much more sense to me, what it tells me is that after Liabilities are removed from the company's assets (assets - liabilities) we know how valuable the company is to the owners and whether or not they can meet their obligations to Stock Holders and Creditors.
---- I seriously misread the question as "what" instead of "why". However I will leave my previous answer as I think it also answers the question of "why" as well as "what".
Another quick reason is, if you take a company's assets deduct the liabilities (what the company owes) you will achieve what the company is worth once all debts are paid (aka Equity). Therefore it stands to reason if you add the Equity of a company to what it owes (liabilities) it's going to give you the amount of assets a company has. For every transaction there is an equal and opposite transaction.
If I buy a car, that car is an asset, even though the note I will be paying on the car is considered a liability. For example, I purchase a car for $50,000 (nice car huh), I pay $10,000 cash for that car, the way it's going to look on my books is as follows.
Assets (car $50,000) = Liabilities (note payable $40,000) + Owners Equity (Car $10,000)
with just the dollar amounts it looks like this.
$50,000 = $40,000 + $10,000
It shows that if I sale the car for $50,000, pay what is left owing of $40,000 I will have equity of only $10,000. These figures change as payments are made and as the liability decreases, my equity will increase.
How are Payments to be applied to Accounts Receivable?
When a payment is received from a customer the adjusting entry is really simple. Cash has to be adjusted for the amount received since the company is actually receiving cash. Accounts recievable will also be adjusted to show payment was received. For example if the payment was in the amount of $500, you would want to Debit Cash and Credit Accounts Receivable, both for that amount of $500.
The important of computer in accounting system?
Accountants and accounting systems have been around for many years.
The direct write off method of accounting for uncollectible accounts violates the?
The_direct_write_off_method_of_accounting_for_uncollectible_accounts_violates_the
I have to say that this question doesn't seem plausible. The reason being,
Current Liabilities are liabilities that are short-termed, meaning they will be paid in a very short time. Usually one year or less.
Long-Term Liabilities are liabilities that are much longer and will be paid out during a long period of time, more than a year.
There should be no current liabilities in long-term liabilities unless an error was made during the accounting process and an current liability was recorded as an long-term, in which case, an adjusting entry must be made to show this error.
Other than an accounting error, there are not current liabilities in long-term to "take out".
Unless the new invoice is higher, then I don't see a problem. As I sated in one answer earlier, most companies do not, will not, or are not suppose to send out revised invoices if they made the error and the original invoice has a lower balance due. The company can request that you pay the new invoice, but most companies, not all usually take the "loss" if it is pointed out that "they" made the error.
Before making any decisions on this, if the revised invoice is higher than the original and you don't want to pay the new balance, I would suggest contacting the company, pay the original invoice and let them now that is the invoice you received and that it was their error.
Personally, I would pay the new invoice regardless, I might not like the idea of paying more money, but I also realize that people do make mistakes and unless the balance is of a very huge significance, I wouldn't contest it.
What is the relationship between direct and indirect costs?
Direct costs: Those costs that are linkedto a specific cost objective like product/service. Indirect costs: Those costs that CANNOT be directly linked to a particular cost objective and incurred for multiple cost objectives. Can also be called Common Cost.
Not under any circumstance is a cash donation considered a gross sale. Cash donations made to the company are recorded as just that "donation". Cash donations made by the company are recorded as that as well. It does not go into sales at all.
Gross Sales is just that "Gross Sales" donations or other moneys received by the company should never be recorded into sales for any reason.
Customers buy on credit for a few reasons, the main one is that at the time of purchase they may not have the required cash for the purchase. Also, customers will buy on credit because it's easier than carrying cash, they can keep their cash on hand and make payments toward the purchase instead of being out the amount of cash at that time.
What is the journal entry for cheque received is it the same with cash received?
debit the bank or cash and credit the supplier or the party from whom we received the cheque or cash
What is the journal entry if a company received a donated truck?
debit truck account
credit donation / retained earnings
Does liability decrease when company receives cash payment?
No, just because company receives cash does not mean that the liabilities will go down. Companies receive cash for merchandise sold, services rendered, money owed to the company from customers, investments, etc. These things will increase assets and either Revenue or Owners Equity (Stockholders equity) but they will not effect liabilities.
Liabilities generally refer to debts owed by the company, such as accounts payable, notes payable etc, which are decreased by the paying of cash, which in turn decreases Assets while decreasing Liabilities at the same time.
In some cases however, Liabilities can "increase" for a short period when a company receives cash. This happens when a company receives cash for a service or even merchandise that they have not supplied to the customer.
Example, say you are a watch manufacturer, you sale 2,000 watches to a customer but you won't actually ship the watches to the customer for say 30 days. That Unearned Revenue (cash) you receive is considered a liability until you actually fulfill your agreement with the customer. The reason for this is due to the fact that if anything happens and you can not fulfill the obligation, then you must repay the money to the customer, hence making it a short term liability. Once the obligation is fulfilled the money is recorded as Revenue and is no longer a liability to you.
