Accounts receivable credit balance is the amount owed to a business by customers who have been given credit. It is necessary for most businesses, and can be risky if owed by employees. It is listed on the balance sheet and income statements until paid.
Accounts receivable credit balance refers to outstanding loans owed to a business by virtue of extending credit to customers. Most businesses, such as retailers and other merchants, often give their customers different forms of credit to streamline the sales process in the form of customer and employee payments. This is in contrast to the transfer of goods or services in exchange for cash, which is easier in terms of the fact that it gives the business the opportunity to get paid upfront, without the need to go through another additional process. The company’s raising of cash also means that it has needed income that it can use to provide services to the company and meet its numerous other obligations. An accounts receivable credit balance is the opposite of a debit balance, although both are included on the balance sheet, since only the debit balance will include overpayments on accounts held by customers.
Most businesses cannot operate without applying some type of accounts receivable credit balance to their balance sheet due to the fact that such businesses cannot make significant sales without extending some type of credit to their customers. The process of granting said credit to customers can be through the application of payments on account to their accounts, so they will only pay a set incremental amount until the full balance has been paid. This type of accounts receivable credit balance will continue to show up in the company’s assets and income statements, since the sale is now complete, and it only remains for the customer to pay the agreed balance in the agreed format. The exact mood for payment of the outstanding balance will be determined by the company’s policies regarding such transactions.
Most companies are aware that there is always a risk that some of the people who owe such money will not pay the same. The risk is even greater when the people who owe the money are company employees due to the fact that they are often not as motivated as the customers to pay the debt. This consideration causes such companies to list outstanding customs and employee debts differently under an accounts receivable credit balance.
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