What Does a Schedule of Accounts Receivable Show?
Understand the detailed breakdown of money owed to your business. Learn how the Accounts Receivable schedule provides crucial financial insights and supports core financial statements.
Understand the detailed breakdown of money owed to your business. Learn how the Accounts Receivable schedule provides crucial financial insights and supports core financial statements.
Accounts receivable (A/R) represents money owed to a business by its customers for goods or services that have been delivered on credit. While the total A/R balance appears as a single line item under current assets on a company’s balance sheet, the “schedule of accounts receivable” provides a detailed breakdown of these outstanding amounts. This schedule offers specific insights into who owes the company money and for what transactions.
The schedule of accounts receivable provides a comprehensive listing of individual customer balances, offering granular detail that the balance sheet summary does not. Each entry typically includes the customer’s name. A unique invoice number is also present.
The invoice date, or transaction date, indicates when the sale occurred or the service was rendered, establishing the starting point for payment terms. A due date specifies when payment is expected, which is often set according to agreed-upon credit terms, such as “Net 30,” meaning payment is due within 30 days of the invoice date. The original amount reflects the total value of the invoice at the time it was issued.
The outstanding balance shows the portion of the original invoice amount that remains unpaid. The sum of all individual outstanding balances listed on the schedule should match the total Accounts Receivable amount reported on the company’s balance sheet. This reconciliation is an accounting control, ensuring the accuracy and integrity of financial records.
A significant feature of an accounts receivable schedule is the “aging” of receivables. Aging involves categorizing outstanding invoices based on the length of time they have been overdue. Common aging categories include current (not yet due), 1-30 days past due, 31-60 days past due, 61-90 days past due, and over 90 days past due.
This categorization highlights which debts are still within their payment terms versus those that have become overdue. It provides insight into the likelihood of collection, as older debts generally become more challenging to recover. For instance, an invoice 90 days past due is more difficult to collect than one that is only 15 days past due.
The aging analysis also offers a view into the effectiveness of a company’s credit and collection policies. A high proportion of long-overdue receivables may suggest issues with credit approval processes or collection efforts. The schedule often presents these aging categories in a columnar format, allowing for a quick visual assessment of the company’s receivable health. This detailed breakdown helps management prioritize collection activities and assess potential bad debt expenses.
The schedule of accounts receivable functions as a direct link between individual sales transactions and a company’s financial statements. It provides the detailed support for the aggregate figures presented in financial reports.
This document’s relationship with the general ledger (GL) is important. The total accounts receivable must reconcile with the accounts receivable control account in the general ledger. This matching process ensures that the detailed subsidiary records align with the summary account, serving as an internal control.
Generally Accepted Accounting Principles (GAAP) require that accounts receivable balances reflect their net realizable value, which is the cash a business expects to collect. The consolidated accounts receivable figure presented on the balance sheet is directly supported by the sum of the detailed balances on the schedule. This connection ensures transparency and auditability, allowing internal and external stakeholders to understand the composition of the accounts receivable asset and its underlying details.