Trade Receivables
Definition: Receivables from normal business operations
Scope:ModerateDifficulty:Easy
Receivables from normal business operations
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Credit sale of goods | ||
| Sell $3,200 of inventory on credit. | ||
| Accounts ReceivableAsset+ | $3,200 | |
| Sales RevenueRevenue+ | $3,200 | |
| Trade receivable arises from core sales operations. | ||
| 2. Collect trade receivable | ||
| Customer remits $3,200. | ||
| CashAsset+ | $3,200 | |
| Accounts ReceivableAsset− | $3,200 | |
| Operating cash inflow on the cash flow statement. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Accounts ReceivableAsset account — amounts owed by customers. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$3,200.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,200.00
$0.00
Sales RevenueRevenue account — income from selling goods or services. Credits increase the balance. Debits decrease the balance.RevenueIncome earned from business operations. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,200.00
Normal bal. ▶
$3,200.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$3,200.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,200.00
DurationShort-Term
Related Subjects
Components
- Allowance for Doubtful AccountsContra-asset that reduces trade receivables to NRV
Related
- Accounts ReceivableTrade receivables are primarily A/R from customers
- Bad Debt ExpenseTrade receivables may become uncollectible
- Net Realizable Value of ReceivablesTrade A/R reported at NRV on the balance sheet
Contrast
- Non-Trade ReceivablesTrade = from sales; non-trade = from other sources
External Links
- Accounts receivable — Wikipedia