Unit 7: Receivables and Payables Identified
During the course of regular business, it is common to provide credit to some customers. Once a business provides an extension of credit, it now owns a promise that it will be paid back. As part of this agreement, the business entity will charge interest at varying rates, which are typically imposed based on the customer's creditworthiness. It is also common that the business will not be able to collect some of these credit extensions. In accounting, we identify these promises someone makes to a business entity as accounts receivable. This unit discusses accounts receivables and highlights specific information on what to do when a business extends credit to its customers.
During the regular course of business, there will also be times where the business entity needs to make specific purchases to support the regular business activity when they do not have enough cash on hand from a current asset perspective. In these situations, the business should have lines of credit, where the business has promised to pay someone else as a result of being extended a particular line of credit or goods on credit. These transactions are considered payables and create liabilities for the organization. Liability can also be considered a promise to pay.
Completing this unit should take you approximately 3 hours.
7.1: Receivables and Payables
7.2: Understanding Bad Debt and its Relationship to Receivables
Unit 7 Assessment