Term: ACCOUNTS RECEIVABLE

Amounts owing to the company, usually by customers who have bought products on credit. This is another term for “debtors” and appears in the balance sheet under current assets. This indicates the amount owed to the company in the short term (normal commercial periods of 30, 60 or 90 days), usually as a result of sales on credit. Debtors are a part of the company’s working capital. Obviously, a company always wants to keep the size of its debtors’ book as small as possible. This is done by monitoring it very closely and making sure that all debts are collected on time or followed up. The management of the debtors book is a key management function and can be assessed using the “debtors days outstanding” ratio.

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