A receivable is an amount owed to a company recorded as an asset on its balance sheet, affecting cash flow and financial health.
A receivable is an amount due to a company from another party. It represents an asset on the company's balance sheet, indicating that the company expects to receive the money owed. This is often recorded when a service has been provided, and the client agrees to pay within a specified time frame.
For example, when a company delivers goods to a customer on credit, the amount owed by the customer is recorded as a receivable. Once the customer pays, the receivable is converted into cash. Receivables play a crucial role in a company's financial health and are essential for managing cash flow.
Accounting procedures ensure that balances between debits and credits always align, maintaining the accuracy of financial statements. Debits increase assets or expenses and decrease liabilities, while credits increase liabilities or net assets and decrease assets or expenses.
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