ACCOUNTS RECEIVABLES Meaning and
Definition
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Accounts receivable refers to the portion of a company's assets that represents the amount of money owed by customers or clients for goods sold or services rendered on credit. It is considered a current asset as it is expected to be converted into cash within a year. In other words, accounts receivable represents the money owed to a business by its customers for the sales made on credit terms.
Accounting-wise, accounts receivable is recorded as a debit to accounts receivable and a credit to revenue when a sale is made on credit, increasing the company's accounts receivable balance. As customers make payments, the accounts receivable balance decreases accordingly. Monitoring and managing accounts receivable is crucial for businesses to ensure timely collection and maintain a healthy cash flow.
Accounts receivable is a significant indicator of a company's liquidity and financial health. It provides insight into the creditworthiness of customers and the effectiveness of a company's credit policies. The aging of accounts receivable, which categorizes unpaid invoices by the length of time outstanding, helps businesses track and identify overdue payments and potential bad debts.
Accounting professionals analyze accounts receivable turnover ratio and Days Sales Outstanding (DSO) to assess the efficiency of collecting payments from customers. Timely collection of accounts receivable is vital for a company's liquidity, as it enables the company to reinvest the cash in operations or reduce debt. Additionally, accounts receivable can be used as collateral for obtaining business loans or factored to improve cash flow.
Common Misspellings for ACCOUNTS RECEIVABLES
- account receivable
- zccounts receivables
- sccounts receivables
- wccounts receivables
- qccounts receivables
- axcounts receivables
- avcounts receivables
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- adcounts receivables
- acxounts receivables
- acvounts receivables
- acfounts receivables
- acdounts receivables
- acciunts receivables
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- acc9unts receivables
- accoynts receivables
Etymology of ACCOUNTS RECEIVABLES
The word "accounts receivable" is a financial term used to describe the money owed to a company by its customers or clients for goods or services that have been provided. The etymology of this term can be broken down as follows:
1. Accounts: The word "accounts" comes from the Old French word "acompte", which means "to reckon" or "to count". It is derived from the Latin word "computare", which means "to sum up" or "to calculate".
2. Receivable: The word "receivable" is derived from the Latin word "recipere", which means "to take back" or "to receive". It is used in the financial context to indicate money that is expected to be received or collected by a business.
Similar spelling words for ACCOUNTS RECEIVABLES
