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Trade receivables

Also called: Receivables, Debtors

What are trade receivables?

Trade receivables is the money that customers owe the business.

It is an asset.

A sale on credit is recorded when it is made, not when the money arrives. When the customer pays, the money moves from Trade receivables to Bank.

Example

A bakery sells bread to a café for £320.00 on credit. Trade receivables is debited with £320.00 and Sales is credited. When the café pays, Bank is debited with £320.00 and Trade receivables is credited.

Why it matters

It shows how much money is still to come in. A debt that will never be paid is not an asset, and leaving it in trade receivables overstates the assets and the profit.

Practise it

  1. 1Buying and selling on credit8 min, easyFree
  2. How to read a customer's account8 min, easyPremium
  3. How to read an aged receivables report8 min, easyPremium
Practise it nowBuying and selling on credit

Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].