Accounts Receivable & payable

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Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2010 Hello sir
What are accounts receivable and payable?
Please explain the process involoved in it.
Please give the accounting entries for that

thanking you

Rahul Gupta

Rahul Gupta (Expert)

07 February 2010 Accounts receivable represents the amount which you can receive from your customers in respect of the sale of goods or services provided. It shows the amount of money people owe to you.

Accounts payable is just reverse of that. It represents the amount which you are required to pay to person from whom you purchased the goods or for the services received. It shows the amount of money you owe to the other person.

Ex. For Accounts Receivable > Let's say u sell inventory worth Rs.5000 to Mr. A on credit, So since no cash is received, you will record the amount due from Mr. A as Accounts Receivable
Accounting entry on sale of goods will be.
Mr. A (Accounts Receivable) - Rs.5000.....Dr
Sales - Rs.5000..Cr

On Receipt of payment from Mr. A
Cash/Bank - Rs.5000...Dr
Mr. A (Accounts Receivable) - Rs.5000...Cr

Ex. For Accounts Payable > Let's say u buy inventory worth Rs.5000 from Mr. B on credit, So since no cash is paid, you will record the amount due to Mr. B as Accounts Payable:
Accounting entry on Purchase of goods will be.
Purchases - Rs.5000...Dr
Mr. B (Accounts Payable) - Rs.5000...Cr

On making payment to Mr. B
Mr. B (Accounts Payable) - Rs.5000...Dr
Cash/Bank - Rs.5000...Cr

Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2010 thanking you sir

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