ACCOUNTS RECEIVABLE Meaning and
Definition
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Accounts receivable refers to the money owed to a business or organization by its customers for goods or services provided on credit. It represents the total outstanding payment from customers yet to be received by the company, typically due within a specified period of time, such as 30, 60, or 90 days. In other words, it is the amount that customers are obligated to pay for purchases made on credit.
Accounts receivable is an important component of a company's current assets, as it represents the expected cash inflows in the near future. It includes invoices issued to customers for their outstanding balances, as well as any accrued interest or penalties associated with late payments.
Companies maintain detailed records of their accounts receivable, tracking individual customer transactions and outstanding balances. This allows them to monitor the amount of money owed by each customer, the date of the sale or service, and the payment terms. Often, businesses assign specific employees to oversee the collection process, verifying and following up on outstanding invoices, and communicating with customers to ensure prompt payment.
Accounts receivable not only provides insight into a company's financial health and liquidity but also plays a vital role in cash flow management. Companies may use various strategies, such as offering discounts for early payment or employing a factor (a financial institution) to purchase the accounts receivable at a discounted rate, to facilitate the timely collection of the outstanding balances and enhance their working capital position.
Common Misspellings for ACCOUNTS RECEIVABLE
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Etymology of ACCOUNTS RECEIVABLE
The term "accounts receivable" has its etymology rooted in accounting and finance.
The word "account" originates from the Middle English word "accounte", which came from the Old French word "aconter", meaning "to count, reckon". It can be traced back to the Late Latin word "computare", meaning "to reckon, calculate".
The word "receivable" comes from the Middle French word "recevable", derived from the verb "recevoir", meaning "to receive". "Receivable" refers to the amount of money that a business or entity has the right to receive as payment for goods sold or services provided.
When combined, "accounts receivable" refers to the record of money owed to a company by its customers or debtors. It represents the outstanding invoices or amounts due that have not been collected yet.
Idioms with the word ACCOUNTS RECEIVABLE
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Assignment of Accounts Receivable
The idiom "Assignment of Accounts Receivable" refers to the process of transferring or assigning the rights and ownership of accounts receivable (unpaid invoices) from one entity to another. It is a common financial practice where a company sells its accounts receivable to a third party, often a financial institution or a factoring company, in order to receive immediate cash flow instead of waiting for the customers to pay. The company assigns the rights to collect the outstanding payments to the third party, who then assumes the responsibility of collecting the funds from the customers.
Similar spelling words for ACCOUNTS RECEIVABLE
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