Question

What does the account Accounts Receivable represent? What is the business transaction that increases this account? What is the business transaction that decreases this asset?

Answer 1

Account receivable means the balance due to a company for goods and services provided but amount is not paid by customers. It is shown under the head of current asset in the balance sheet.

Account receivable is created because sales made on credit. Thus, sales is transaction due to which account receivable increases.

Entry :

Account Receivable A/c   Dr.

To Sales A/c

It is decreased when payment is received from the customers.

Bank A/c     Dr

   To Account Receivable A/c