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Net Receivables – Definition

Net Receivables Definition

Net receivables refers to the total amount of money owed by the customers of a company. It refers to the amount a company is confident it can collect from customers that owe the company. Net receivables are usually calculated as the total of money owed to a company by its customers minus bad debt or doubtful account (the money owed that might not likely be paid back). The higher the net receivables of a company, the higher the money the company is confident it can collect from debtors.

A Little More on What are Net Receivables

Net receivables are presented as the percentage of the total amount of money that the customers of a company owes it which the company is confident it can collect. For instance, if the net receivables are company A is 88%, it means 12% of the debt owed to it by customers are likely not to be repaid. The higher the net receivables of a company, the higher its chances of collecting back all the money owed by its customers.

How well a company uses cash and how effective it is collection of debt is shown through net receivables.

Allowance for Doubtful Accounts

Doubtful accounts are a debt owed to a company by its customers that might never be paid. The allowance for doubtful accounts is subtracted from the accounts receivable of a company to arrive at net receivable. Accounts receivables represent the total amount of money owed to a total by its customers when the allowance for doubtful accounts is deducted, what is left is the net receivables. The allowance for doubtful accounts functions like a contra asset account which reduces the balance recorded as an asset.

Balance Sheet

The balance sheet of a company contains all the income, expenses, debts and revenue of a company for an accounting period. Net receivables are also recorded in the balance sheet, they are shown as an aggregated total. The net receivables are categorized as a current asset, but this balance is reduced when the allowance for doubtful accounts has been deducted.

References for “Net Receivables

https://www.investopedia.com › Investing › Financial Analysis

https://www.accountingtools.com/articles/2017/5/12/net-receivables

https://investinganswers.com/dictionary/n/net-receivables

www.businessdictionary.com/definition/net-receivables.html

www.investorwords.com/16658/net_receivables.html

https://financial-dictionary.thefreedictionary.com/Net+Receivables

 

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