Receivables & Audits: key terms, formulas and examples
Receivables are what customers owe you; payables are what you owe suppliers. An audit independently checks the books, and a budget plans income and spending.
Example
A customer unpaid after 8 months becomes bad debt and must be written down.
Takeaway
Chase receivables early and compare budgets with real results.
Key terms
- Accounts receivable
- Money customers owe you for goods or services already delivered.
- Accounts payable
- Money your company owes suppliers for things already received.
- Audit
- An independent check that financial records are accurate.
- Tax deduction
- An expense you can subtract to lower taxable income.
- Budget
- A plan for how much money you expect to earn and spend.
- Bad debt
- Money a customer owes that will probably never be paid.
- Ledger
- The book that records all of a company's accounts and transactions.
Formulas
Receivables turnoverR ÷ AR
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