√ Definition of Accounts Receivable, Types and Complete Accounting Problems
Definition of Accounts Receivable, Types and Complete Accounting Problems – In this discussion, we will review accounts receivable. Which includes understanding, types, accounting issues related to trade receivables with a complete and easy-to-understand discussion.
Definition of Accounts Receivable, Types and Complete Accounting Problems
For more details, please see the review below carefully.
Definition of Accounts Receivable
Trade receivables or in English Accounts Receivable are company rights or claims against other parties which will eventually be requested for payment when the time is right.
These trade receivables arise because the company sells merchandise or other goods by credit. Van Horne And Wachowicz states, trade receivables are an amount of money transferred to a company by customers who have purchased goods or services on credit.
Often, these trade receivables are not mentioned in a special agreement like other invoices. In this way, the settlement of trade receivables cannot be guaranteed and it is also difficult to transfer or trade.
Trade receivables that are required to be collected within one year or the normal business cycle are categorized as current assets, but sometimes all accounts receivable as current assets regardless of time period he collects.
In such cases, the amount of accounts receivable with a collection period of more than one year or the normal business cycle must be disclosed in the notes to the financial statements. If sales on credit are subject to VAT (Value Added Tax) of 10% of the price of the goods, trade receivables are recorded including VAT.
When collecting trade receivables, you do not complete a formal agreement but only trust and company policy by setting sales terms such as 3/10, n/30.
This number means that the customer pays off within a period or equal to 10 days from the date of the transaction, it will be given discount or discount of 3% and the receivable is expected to be received within a maximum period of 30 days after transaction.
Types of Trade Receivables
There are several types of trade receivables, including:
-
Bills Receivable
These notes receivable or notes receivable are strengthened by formal promises in writing as payment. -
Accounts receivable
Trade receivables or accounts receivables are trade receivables that are not guaranteed by open accounts. Trade receivables are short-term credit extensions to customers. Payments can be made when due within 30-90 days.
Accounting Issues Related to Accounts Receivable
Often, accounting issues related to accounts receivable include the following:
- Recognition of accounts receivable
- Valuation of accounts receivable
- Transfer of accounts receivable
Recognition of Accounts Receivable
An account receivable can be recognized or recorded when a company obtains the trade receivable in a manner carry out credit sales transactions, the occurrence of sales returns and allowances, and there is settlement of trade receivables by company.
Accounts Receivable Valuation
Based on Indonesian accounting principles, trade receivables must be recorded and reported on the balance sheet at value net cash (net) that can be obtained by the amount of receivables after deducting Allowance for Losses on Unsecured Accounts collectible.
Transfer of Accounts Receivable
This means that the transfer of accounts receivable is when a company transfers existing trade receivables to another party such as banks, financial institutions and pawnshops whose purpose is to accelerate cash receipts from receivables. There are several reasons for companies to sell or transfer their receivables, namely:
- The condition or condition of the company is experiencing difficulties in obtaining loans and the high interest rate causes the company to convert existing receivables into cash.
- Collection of customer receivables usually takes a long time and sometimes too costs, this makes the company choose to receive cash that is smaller than cash Actually.
Thus has been explained about Definition of Accounts Receivable, Types and Complete Accounting Problems. Hopefully it can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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