Question

What conditions need to be met for a firm to record an accounts receivable?

Answer 1

Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivables are listed on the balance sheet as a current asset. AR is any amount of money owed by customers for purchases made on credit.

To properly record accounts receivable, generate an invoice, then proceed with the following three key steps:

Step 1: Send the invoice

Send an invoice immediately after providing a customer a product or service. You'll need the invoices to keep account ledgers accurate and up to date.

Step 2: Track the invoice

Check for the payment on a weekly basis. If it doesn't arrive, send the customer a reminder.

Step 3: Receive and record payment

When you receive the payment, record it as "paid" and enter it into your accounts receivables ledger. Make sure your customer records are matched squarely with your financial ledgers. In the accounts receivable world, it's vital to monitor who's paying you and when they're paying you.