Business People Club

Revenue and receivables

0 like 0 dislike
390 views
in Articles - PositiveVoid
In most businesses, what drives the balance sheet are sales and expenses. In other words, they cause the assets and liabilities in a business. One of the more complicated accounting items are the accounts receivable. As a hypothetical situation, imagine a business that offers all its customers a 30-day credit period, which is fairly common in transactions between businesses, (not transactions between a business and individual consumers).

An accounts receivable asset shows how much money customers who bought products on credit still owe the business. It's a promise of case that the business will receive. Basically, accounts receivable is the amount of uncollected sales revenue at the end of the accounting period. Cash does not increase until the business actually collects this money from its business customers. However, the amount of money in accounts receivable is included in the total sales revenue for that same period. The business did make the sales, even if it hasn't acquired all the money from the sales yet. Sales revenue, then isn't equal to the amount of cash that the business accumulated.

To get actual cash flow, the accountant must subtract the amount of credit sales not collected from the sales revenue in cash. Then add in the amount of cash that was collected for the credit sales that were made in the preceding reporting period. If the amount of credit sales a business made during the reporting period is greater than what was collected from customers, then the accounts receivable account increased over the period and the business has to subtract from net income that difference.

If the amount they collected during the reporting period is greater than the credit sales made, then the accounts receivable decreased over the reporting period, and the accountant needs to add to net income that difference between the receivables at the beginning of the reporting period and the receivables at the end of the same period.

Please log in or register to reply to this post.

Related posts

0 like 0 dislike
0 comments 378 views
0 like 0 dislike
0 comments 363 views
0 like 0 dislike
0 comments 357 views
0 like 0 dislike
0 comments 356 views
0 like 0 dislike
0 comments 333 views
0 like 0 dislike
0 comments 262 views
0 like 0 dislike
0 comments 289 views
0 like 0 dislike
0 comments 1,313 views
0 like 0 dislike
0 comments 406 views
0 like 0 dislike
0 comments 380 views
0 like 0 dislike
0 comments 367 views
0 like 0 dislike
0 comments 403 views
0 like 0 dislike
0 comments 391 views
0 like 0 dislike
0 comments 379 views
0 like 0 dislike
0 comments 364 views
0 like 0 dislike
0 comments 350 views
0 like 0 dislike
0 comments 384 views
0 like 0 dislike
0 comments 372 views
0 like 0 dislike
0 comments 375 views
0 like 0 dislike
0 comments 371 views
0 like 0 dislike
0 comments 335 views
0 like 0 dislike
0 comments 360 views
0 like 0 dislike
0 comments 327 views
0 like 0 dislike
0 comments 385 views
0 like 0 dislike
0 comments 311 views
0 like 0 dislike
0 comments 302 views
0 like 0 dislike
0 comments 314 views
0 like 0 dislike
0 comments 309 views
0 like 0 dislike
0 comments 267 views
0 like 0 dislike
0 comments 290 views
0 like 0 dislike
0 comments 261 views
0 like 0 dislike
0 comments 262 views
0 like 0 dislike
0 comments 308 views
0 like 0 dislike
0 comments 301 views
0 like 0 dislike
0 comments 305 views
Connect with us:
...