A company certainly has a company bill. Through this company bill, the company will later claim and receive some money from a third party. Claims and receiving of this amount of money will occur within one year or in some period of the company’s operational activities. This thing is generally known by the public, especially companies, as account receivable. This article will provide information to the readers about the characteristics and types of account receivable.
The Definition of Account Receivable
Before knowing more about account receivable, you have to know first the definition. Account receivable is a payment billing that a company proposes to consumers or buyers who have been in debt. In other words, account receivable is proprietary of a person or a party in the form of money that has not been paid.
Many experts express their opinions about the definition of account receivable. For example, Mohammad Muslich said that account receivable occurs because goods or services are sold by credit, which is generally done to enlarge sales. In addition, Warren Reeve and Fess said that account receivable include all claims in the form of money from the other parties, including individuals, companies, or other organizations.
Also read: A Quick Guide to Financial Accounting
The Characteristics of Account Receivable
To make you understand well about the account receivable, you can find out their characteristics. Here are the characteristics of account receivable:
Have a due date
The due date can be see from the account receivable ages. Usually, the seller or company uses two types of account receivable age measurements such as days and months. If the ages in days, it will be calculate to know the exact due date. Meanwhile, if the ages in a month, the due date will be the same as the date of the transaction but in different months.
Have a maturity value
In this case, the maturity value is the total of the main transaction value then coupled with the interest value that must be paid when entering the due date. If the buyers make a transaction with the credit method, they not only pay a certain amount of the value of the item that has been purchased, but they also have to pay the interest. This is because the buyer asks for extra time to the seller or company to pay for the item purchased.
Have an interest applies
Buyers who make transactions on credit will cause account receivable. Later on, this will also cause an interest. The buyer will pay the interest as a consequence of an extended repayment time. In addition, interest is being a compensation for the seller or company for the repayment time of the credit that the buyer made.
The Classification of Account Receivable
Account receivable can be classified into two categories such as trade receivable and non-trades receivable. Here is the explanation of each category:
Trade receivable is a type of account receivable that makes an open account, not makes it as a guarantor. This category usually has 30 to 90 days of repayment time. Examples of this category such as account and notes receivable.
It can be said that non-trade receivable can come from various transactions such as company branch down payment, interest, and dividends, employee and staff receivable, deposit to cover losses, and deposit as collateral for transactions or services payments.
The Types of Accounts Receivable
Here are the types of account receivable along with their explanations:
Account receivable is the number of credit purchases that come from customers or buyers. People also know this as trade receivables. The repayment period or time will range from 30 until 60 days.
This type is an issued formal letter as a form of debt measurement. Usually, notes receivable have 60 until 90 days of repayment period or time. If the buyer requests an extend repayment period or time, the buyer will be require to pay the interest.
The other receivable covers more broadly, such as salary receivable, interest receivable, tax restitution, and employee down payment. These receivables can be classified in separate balance sheet sections because they do not come from company operational activities.
Account receivable is a billing form that the seller or company proposes to the buyer who has been in debt. In account receivable, there are several characteristics. One of them is having a maturity date that can be see from the account receivable ages. In addition, there are several types of account receivable, from notes receivable to other receivable.
HashMicro as a leading ERP Software vendor in Singapore provides solution for your company in operating business automatically, ranging from Accounting System to Competency Management System. Feel free to contact us for get the best offer and free demos.