![]() If not, the company can charge a late fee or hand over the account to a collections department. Till that time the amount of Rs 1,00,000 becomes your account receivable because the customer will pay that amount before the period expires. Now, when the invoice is generated for that amount, sale is recorded, but to make the payment the company extends the credit period of 30-days to the customer. Suppose you are a manufacturer M/S XYZ Pvt Ltd and you manufacture tyres.Ī customer gives you an order of Rs 1,00,000 for 100 tyres. ![]() Let's understand AR with the help of an example. The time period could vary from 30-days to a few months.Īccount Receivables (AR) are treated as current assets on the balance sheet. ![]() When a company extends credit to the customer, the sale is realised when the invoice is generated, but the company extends a time period to the customers to pay the amount after some time. Usually, the company sells its goods and services both in cash as well as on credit. This means that the company must have extended a credit line to its customers. Usually the credit period is short ranging from few days to months or in some cases maybe a year.ĭescription: The word receivable refers to the payment not being realised. ![]() Definition: Accounts Receivable (AR) is the proceeds or payment which the company will receive from its customers who have purchased its goods & services on credit.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |