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Account Receivable: Characteristics and Types that You Need to Know!

A company certainly has a company bill. The company will later claim and receive some money from a third party through this company bill. Claims and receiving of this amount of funds will occur within one year or in some period of the company’s operational activities. The public generally knows this thing, especially companies, as account receivable. This article will provide information about the characteristics and types of accounts receivable.

account receivable

 

The Definition of Account Receivable

account receivable
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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, it is proprietary of a person or a party in the form of money that he should pay.

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, generally done to enlarge sales. In addition, Warren Reeve and Fess said that account receivables 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, you can find out their characteristics. Here are the attributes of it:

Have a due date

We can see the due date from the ages. Usually, the seller or company uses two types of account receivable age measurements such as days and months. If the generations are in days, they need to calculate the exact due date. Meanwhile, the ages in a month and the due date will be the same as the transaction date but in different months. 

Have a maturity value

In this case, the maturity value is the total of the principal 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 from the seller or company to pay for the item purchased.

Have an interest applies

Buyers who make transactions on credit will cause accounts receivable. Later on, this will also cause an interest. The buyer will pay the interest due to an extended repayment time. In addition, interest is 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 class:

Trade receivable

Trade receivable is a type 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 include accounts and notes receivable.

Non-trade receivable

It can be said that non-trade receivables 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 accounts receivable along with their explanations: 

Account receivable

Account receivable is the number of credit purchases from customers or buyers. People also know this as trade receivables. The repayment time will range from 30 until 60 days.

Notes receivable

This type is an issued formal letter as a form of debt measurement. Usually, notes receivable have 60 until 90 days of the repayment time. If the buyer requests an extended repayment period, the buyer will be required to pay the interest.

Other receivable

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.

Also read: Liquidity Is: Know the Benefits and How to Calculate Them

Conclusion

Account receivable is a billing form that the seller or company proposes to the buyer who has been in debt. In addition, there are several characteristics. One of them is having a maturity date seen from the. Also, there are several types of accounts receivable, from notes receivable to the other.

HashMicro, a leading ERP Software vendor in Singapore, provides solutions for your company in operating business automatically, ranging from Accounting systems to Competency Management systems. Feel free to contact us to get the best offer and free demos.

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