Accounts Receivable

A/R or Accounts Receivable is one of the series of accounting transactions concerned with the billing of the consumer for products and services which the have ordered.

Payment Terms

Some of the common types of payment terms are Net 30, Net 60 and Net 45. Net 30 means the payments are due at the end of thirty days from the date of invoice. Debtor is allowed to pay before the due date, however many of the business organizations offer a discount for those who make payments early.

Booking a receivable is done by a simple accounting transaction but the procedure of collecting and maintaining the payments on the on the accounts receivable subsidiary account balances could be a full-time proposition.  Based on the industry in practice, the accounts receivable payments could be received up to ten to fifteen days after the due date has been over or reached.  These kinds of payments practices are at times created by corporate policy, business organization standards or due to the economic condition of the customer.

Since not all the client debts will be accumulated, the business organizations generally estimate the value or amount and then they post an allowance for doubtful accounts that comes on the balance sheet like a contra account which equalizes the total accounts receivable. When the accounts receivable are not paid, a few business organizations turn them over to negotiator (third party) collection attorneys or collection agencies that will make an effort to recover the debt through settlement offers, pursuing legal action or negotiating payment plans.  Outstanding payments are part of the accounts receivable that a business organization receives an order from the client with payment terms agreed upon beforehand.

Questionnaire:

• What is account receivable?
• What is Net 30?
• What are the payment terms in accounts receivable?