Accounts Receivable Common Terms and Definition

What is the definition of receivable? What is the most common term used around the accounts receivable area? You can find accounting terms and definitions around the topic, here.

  • Accounts receivable – Amounts owed by customers on account.
  • Receivables – Amounts due from individuals and other companies.
  • Accounts receivable (customers’) subsidiary ledger – A subsidiary ledger that collects transaction data of individual customers.
  • Accounts receivable turnover ratio – A measure of the liquidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable.
  • Aging the accounts receivable – The analysis of customer balances by the length of time they have been unpaid.
  • Allowance method – A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period.
  • Average collection period – The average amount of time that a receivable is outstanding; calculated by dividing 365 days by the accounts receivables turnover ratio.
  • Bad Debts Expense – An expense account to record uncollectible receivables.
  • Cash (net) realizable value – The net amount a company expects to receive in cash.
  • Direct write-off method – A method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible.
  • Dishonored note – A note that is not paid in full at maturity.
  • Factor – A finance company or bank that buys receivables from businesses and then collects the payments directly from the customers.
  • Maker – The party in a promissory note who is making the promise to pay.
  • Notes receivable – Claims for which formal instruments of credit are issued as proof of the debt.
  • Other receivables – Various forms of nontrade receivables, such as interest receivable and income taxes refundable.
  • Payee – The party to whom payment of a promissory note is to be made.
  • Percentage-of-receivables basis – Management estimates what percentage of receivables will result in losses from uncollectible accounts.
  • Percentage-of-sales basis – Management estimates what percentage of credit sales will be uncollectible.
  • Promissory note – A written promise to pay a specified amount of money on demand or at a definite time.
  • Trade receivables – Notes and accounts receivable that result from sales transactions.

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