Learning More About What Accounts Receivable are There are times when buyers would find it very hard to give money to sellers in full especially with huge investments but fortunately, there are sellers out there who will allow this kind of buyers to just compensate them in a later due date. This kind of move from the company is in order for them to gain another source of income which is referred to as an accounts receivable and if you’re not knowledgeable about it, what they did will surely seem like just an unselfish and lavish act from their side. When purchase is made and the customer finally decides to just push the compensation stage, the information about the buy would be recorded as an accounts receivable and the customer would be alerted about it every month through an invoice and billing statement.
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The invoice and billings statement will contain the price of the purchase which the customer has made and also includes shipping fees and taxes that comes with the purchase.
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If you’ve searched Accounts Receivable on the internet already or have been in an Accounting Class in the past, there’s no doubt that this concept and ideas aren’t new to you already. Making the matter more complex and more intricate than the introduction, there are two methods on which accounts receivable could go in the financial book of the company: one of which is the accrual accounting and the other is the cash-basis type. You may be at loss at first how the company would be able to make money or gain advantage in accounts receivable and that can be answered through these methods of manipulating the entry and exit of money from the books of the company. In this article, we will focus on one of the most used accounting method, the cash-basis method. Amazingly, this Account Receivable management lends the company and the customer a hand in avoiding to pay a certain tax amount for a year and is more often fitter to be used during the end months of a year. This method can be explained easier through an example: think about a buyer who purchases a product from your company during the last quarter of the year, then he or she pays for it on January of the next year. Through this technique, the buyer and the seller wouldn’t have to settle the payment of tax for that particular transaction not until the end of the year when it was finally placed on the financial book. There are other methods out there that the company could possibly use for their accounts receivable recording process, but the benefits which this accounts receivable management technique could bring still makes it the most ideal choice for businesses.