Info 1: account receivable definition
Info 2: how accounts receivable works
Info 3: account receivable vs account payable
Info 4: example of account receivable
Opening Information:
Account receivable breaks into two words account and receivable, account means things that are
track the credit and debits, receivable means the amount that needs to be paid.
Account receivable means the amount of money that needs to be paid inside the account, so now let’s have a look at what is an account receivable, how the account receivable works in the public market, and what is the difference between the account receivable and account payable, finally one clear example about the account receivable.
Info 1: account receivable definition
Mr.latik is a businessman, who works as an accountant and had own business too in the mining niche, it has more than 5000 Shares holders. among them, Mr.latik owned 8 percent of the petroleum mining company.
Whenever petroleum was delivered to other businesses and wholesale firms, they only made a payment in the next 100 days of delivery of the petrol.
At the same time if latik mining Industry buys any of the substance or materials from another business it won’t make payment on the current day of the delivery indeed only make a payment in the next 80 days or 90 days.
Here the payment which is non arrived for the delivered petrol to other business for 100 days is named as account receivable.
Because any of the business or institutions had not arrived their payment after the delivery, until the payment was made by them such income would be marked as account receivable.
This same concept would be applied to all public Corporations, so let’s dive into how the
account receivable Involve and work in the public market.
Info 2: how accounts receivable works
Account receivable doesn’t represent any specific amount of object or things, instead, it’s an accounting term that is used to identify the money that is needed to receive from the customers or any other party.
Therefore any of the accounts reports on the balance sheet assets side as an account receivable, then such term referring the amount that needs to be paid from the outside party.
If the amount does not need to be received from the third party, then such an amount would need not be included in the account receivable item.
If any of the businesses which order a big amount of product from the other business, they are not paid such amount for the whole product within one day, instead, they are paying much money with 3 months or some business might pay the amount in next 100 to 150 days depends on their deal. This deal happens and the complete payment is within an agreed period.
Where such amounts that are not paid by other businesses to the product or service distributed business are accounted as accounts receivable until such amount is received from the other Industries.
On the other hand, some consumers purchase a huge amount of products or have a membership to pay once every 3 months or 6 months, where such consumers are completely paid at the due date or agreed day. This amount is included in the account receivable.
Then the distributor and whole salesman are never paid the amount within a received day from the other businesses, where they had a strongly agreed deal for each business to make a payment.
Based on the agreed time the payments are made by each one, all the payments are noted as accounts receivable until it’s paid to that business.
Most people confuse accounts payable and accounts receivable, so let’s jump into the key difference in it anyway.
Info 3: account payable vs account receivable
The difference between account payable and account receivable is, that account payable demonstrates the payment which is needed to be paid by the business and not received money from other businesses.
On the other side, accounts receivable are the ones that elaborate the things that are needed to pull the payment from the outsider of the public Industries.
So the key difference between the account payable and the account receivable are out payment and in payment. To make you more clear about the accounts receivable, let’s look into one brief example below.
Info 4: example of account receivable
Say you are a stock investor who is looking to invest in a Stock G company and you reading a balance sheet on one company.
Such a balance sheet demonstrates the two lines of account terms one from the asset side and another from the liabilities side. That one line stated to receive the 15 million dollars and another one defines company G needs to pay 12 million for any other public Industry.
Here the 15 million shows the account receivable and 12 million shows the account payable.