Accounts Receivable Research Paper Example | Topics and Well Written Essays - 750 words

Accounts Receivable - Research Paper Example If such settlement is made between the company and its customers, the amount owed to the company by the customer is shown in a separate account known as account receivable. This accounts help in establishing long-term relationships between a customer and a company. However, account receivable is usually opened in the case of the customers only whose credit risk is above a certain criteria and whose past history with the company is good. The account receivables are also opened in a case where sale is made or service is provided, the invoice has been raised against the customer but the amount has not yet been received as the money is in the course of transit. This may be the case where the money is in transit, that is, in transit if sent through a banking channel or in transit in the route of courier. The sale and revenue is recorded as soon as the invoice is raised against a certain transaction. The invoice is sent to the customer who, after receiving the invoice, sends money to the company. Even if no settlement in respect of deferring the payment has been made between the company and the customer, some time may lapse between the course of the procedure. During this period, the company opens an account against the customer known as account receivable in which the amount owed by the customer is shown. Accounts receivables are shown in the Balance Sheet as a separate head of account in the current assets. The movements in account receivable are made through the payments received and the sales made or the services provided in respect of which payment has not been yet received. The balance is shown in the balance sheet. It may also happen that some of the account receivables are gone bad in the period, such as the customer has gone into liquidation. In such a case, the money owed by the customer or a portion thereof will be written off by charging an expense in the profit and loss account as a