Types of Receivables in Accounting

What type of account is accounts receivable?

Accounts receivables, listed as a current asset, signify money owed by customers for provided goods or services.Displayed on the balance sheet under current assets, it affects a company’s liquidity and working capital. The general ledger typically shows a debit balance for receivables.

What is the significance of receivables?

Receivable entries are beneficial to businesses and their clients because they allow businesses to maintain a steady supply of products. The relationship between the business owner and the account holder can be documented using various receivable entries. In bookkeeping, the different types of receivables are recorded in the financial statements.

When a business has a claim against a customer for a short-term extension of credit, they create a receivable entry in its accounting system and send an invoice to the client to request payment.

Receivables can be used as collaterals to secure loans that can enable businesses to meet short-term obligations. They are considered liquid assets and are a key part of the business’s working capital. It is critical for any enterprise to handle receivables effectively as they offer additional capital to fund operations and allow the enterprise to reduce its net debt.

What are the different types of receivables?

What is trade/accounts receivable (A/R)?

Example of accounts receivable (A/R)

What is notes receivable?

What are other receivables?

Conclusion

Receivables management is often treated as an alternative accounting function that helps balance the books. To optimize finance operations and optimize cash inflows, the finance team looks at receivables as a strategic area of the business operations. Managing receivables is not easy, but controlling the process drives business achievement in a positive direction.  

HighRadius’ AI-Driven Autonomous Finance Solution allows you to eliminate manual steps and streamline operations. AI-powered A/R can enable features like real-time data management that help you get the latest details on customers’ financial health and predict credit risk outcomes. Accounts receivable automation can help create a positive working capital impact for businesses by improving cash flow, reducing payment delays and collection costs, and improving customer relationships. By automating the accounts receivable process, businesses can manage their working capital more effectively and improve their financial position.

FAQ 

How are receivables different from accounts payable?

Accounts payable (AP) refers to the amount your organization owes a third party for stock or services purchased on credit, while receivable refers to the amount that your company will be paid later. 

Where are other receivables recorded?

Other receivables, which have features similar to trade receivables, are recorded under current assets on the balance sheet. Current assets are those that are estimated to be converted to cash in the coming year.

Is other receivables debit or credit?

Other receivables are recorded as an asset. Hence, they remain a debit, as it is the amount due to the company. Receivable is cash due to the company, from which it can sooner or later generate benefits.