Discuss how you think accounts receivable would impact a business you would like to open or work for in the future. Be sure to include in your discussion, uncollectible accounts.
An accounts receivable, an asset on the balance sheet, is a balance that is owed to the business. Because the collection of the balance is due in the near term, it is recorded as a current asset. In case the balance is not collectible, a business will establish a bad debt expense on their books, to ensure that the balances reflected are accurate.
Answer and Explanation:
In a restaurant, there are many cases in which items are to be paid via accounts receivables. An example includes catering.
If a business has too many accounts receivables on the books, and not enough cash, the business will fail (as there is not enough cash to pay the bills). Thus, to avoid this, it is important to set up periods in which customers can pay their bill sooner, at a discount.
Also, the business should assume that there will be defaults on their accounts receivables, or collectible amounts, and should be estimated by the bad debt expense.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Accounting 101: Financial AccountingChapter 7 / Lesson 1