How to Determine Net Accounts Receivable (With Pictures)
Content
12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
How to Determine Net Accounts Receivable
Accounts receivable is a concept used in accounting to indicate payments due to a business. When a business sells its product on credit, the customer is invoiced and then given a set time period (often 30 days) to pay. This payment model carries an inherent risk that the customer may default and the business will not be able to collect the money it is owed. Therefore, there is always a difference between the accounts receivable balance and the portion of that balance that is actually expected to be collected. When the non-collectable amount is subtracted from the accounts receivable balance, the resulting figure is called "net accounts receivable." Learning how to determine net accounts receivable requires the use of historical data regarding customer payments.
Steps
1
Assign a net accounts receivable balance according to its historical balance. The most straightforward way to determine net accounts receivable is to infer it from
historical data. Examine the company's accounts receivable balance over the past few years, examining the amount of uncollected debt as well (this amount can be found in the "Bad Debt Expense" account). Determine the average percentage of accounts receivable that is collected by the business; this amount can be used as a reasonable estimate of the current net accounts receivable balance.
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12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
2
Create a receivables aging schedule. The other, more in-depth way to determine net accounts receivable is through what is called an aging schedule. This is a
schedule that involves sorting invoices by date and estimating the probability that an invoice will be paid based on how many days past due it is. Begin by sorting all of your current invoices (both paid and unpaid) by date originated. Then, create a chart that divides invoices into categories by age, such as: current, 31 - 60 days past due, 61 - 90 days past due, 91 - 120 days past due, and over 120 days past due. Record the total balance and total outstanding balance of all invoices in each category. Then, determine the percentage of each category that has been paid. For example, if there are $100,000 worth of current invoices and the balance paid is $95,000, then 95 percent of current invoices have been paid.
3
Calculate a weighted percentage of invoices paid. After determining the percentages paid for each age category, you can calculate a weighted average for all First, determine the percentage of all receivables that each age category represents. For example, if the current invoice total is $100,000 and the overall
accounts receivable.
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12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
invoice total is $140,000, then current invoices account for (100,000 / 140,000) or 71 percent of all accounts. Likewise, if the 31 to 60 day category total is $30,000, then those accounts represent (30,000 / 140,000) or 21 percent of all accounts. Next, multiply the proportion of each age category by the percentage paid in that category. For example, If the current invoices represent 71 percent of all invoices and they are 95 percent paid, the number arrived at is (.71 * .95) or 0.67. After performing the above calculation for all age categories, add these numbers together. The result is the overall net accounts receivable, expressed as a percentage of the accounts receivable balance.
4
Determine the net accounts receivable balance. To arrive at the actual balance of net accounts receivable, multiply the percentage arrived at through the weighted
average calculation by the accounts receivable balance. For example, if the percentage calculated above is 91 percent, and the total accounts receivable balance is $200,000, then net accounts receivable are (.91 * 200,000) or $182,000.
Simple Invoicing Software
www.inv24.com New Generation Invoicing Software Make Invoices Online with us !
Ready to Publish Novels? Free ACCA Notes/Lectures
Tips
Most accounting software applications will create receivables aging schedules automatically from your invoices. The calculations above will also work when expressed in other currencies.
www.wikihow.com/Determine-Net-Accounts-Receivable
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12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
Your Zodiac Horoscope
aboutastro.com Insert Your Birthdate & Get Answers about Past-Present and Future. Free
Acoustic guitar preamp Credit DIVERS BCR
Things You'll Need
Accounting software
Sources and Citations
http://www.investopedia.com/terms/n/netreceivables.asp#axzz1XKowDq vU http://www.accountingcoach.com/online-accountingcourse/24Xpg05.html
Article Info
Categories: Finance and Business Recent edits by: TabbyNevinz6, HighAndLoopy, Carolyn Barratt
Chi Mei™ Polymers
www.biesterfeld-plastic.com Distributor for ABS, SAN, SBS, SBD: Biesterfeld Plastic GmbH
Thanks to all authors for creating a page that has been read 24,591 times.
www.wikihow.com/Determine-Net-Accounts-Receivable
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How to Determine Net Accounts Receivable (with Pictures)
How to Determine Net Accounts Receivable
Accounts receivable is a concept used in accounting to indicate payments due to a business. When a business sells its product on credit, the customer is invoiced and then given a set time period (often 30 days) to pay. This payment model carries an inherent risk that the customer may default and the business will not be able to collect the money it is owed. Therefore, there is always a difference between the accounts receivable balance and the portion of that balance that is actually expected to be collected. When the non-collectable amount is subtracted from the accounts receivable balance, the resulting figure is called "net accounts receivable." Learning how to determine net accounts receivable requires the use of historical data regarding customer payments.
Steps
1
Assign a net accounts receivable balance according to its historical balance. The most straightforward way to determine net accounts receivable is to infer it from
historical data. Examine the company's accounts receivable balance over the past few years, examining the amount of uncollected debt as well (this amount can be found in the "Bad Debt Expense" account). Determine the average percentage of accounts receivable that is collected by the business; this amount can be used as a reasonable estimate of the current net accounts receivable balance.
Forex în România
www.plus500.ro Tranzacții CFD pe EUR/USD, EUR/GBP. Vă riscaţi propriul capital.
www.wikihow.com/Determine-Net-Accounts-Receivable
1/4
12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
2
Create a receivables aging schedule. The other, more in-depth way to determine net accounts receivable is through what is called an aging schedule. This is a
schedule that involves sorting invoices by date and estimating the probability that an invoice will be paid based on how many days past due it is. Begin by sorting all of your current invoices (both paid and unpaid) by date originated. Then, create a chart that divides invoices into categories by age, such as: current, 31 - 60 days past due, 61 - 90 days past due, 91 - 120 days past due, and over 120 days past due. Record the total balance and total outstanding balance of all invoices in each category. Then, determine the percentage of each category that has been paid. For example, if there are $100,000 worth of current invoices and the balance paid is $95,000, then 95 percent of current invoices have been paid.
3
Calculate a weighted percentage of invoices paid. After determining the percentages paid for each age category, you can calculate a weighted average for all First, determine the percentage of all receivables that each age category represents. For example, if the current invoice total is $100,000 and the overall
accounts receivable.
www.wikihow.com/Determine-Net-Accounts-Receivable
2/4
12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
invoice total is $140,000, then current invoices account for (100,000 / 140,000) or 71 percent of all accounts. Likewise, if the 31 to 60 day category total is $30,000, then those accounts represent (30,000 / 140,000) or 21 percent of all accounts. Next, multiply the proportion of each age category by the percentage paid in that category. For example, If the current invoices represent 71 percent of all invoices and they are 95 percent paid, the number arrived at is (.71 * .95) or 0.67. After performing the above calculation for all age categories, add these numbers together. The result is the overall net accounts receivable, expressed as a percentage of the accounts receivable balance.
4
Determine the net accounts receivable balance. To arrive at the actual balance of net accounts receivable, multiply the percentage arrived at through the weighted
average calculation by the accounts receivable balance. For example, if the percentage calculated above is 91 percent, and the total accounts receivable balance is $200,000, then net accounts receivable are (.91 * 200,000) or $182,000.
Simple Invoicing Software
www.inv24.com New Generation Invoicing Software Make Invoices Online with us !
Ready to Publish Novels? Free ACCA Notes/Lectures
Tips
Most accounting software applications will create receivables aging schedules automatically from your invoices. The calculations above will also work when expressed in other currencies.
www.wikihow.com/Determine-Net-Accounts-Receivable
3/4
12.12.2013
How to Determine Net Accounts Receivable (with Pictures)
Your Zodiac Horoscope
aboutastro.com Insert Your Birthdate & Get Answers about Past-Present and Future. Free
Acoustic guitar preamp Credit DIVERS BCR
Things You'll Need
Accounting software
Sources and Citations
http://www.investopedia.com/terms/n/netreceivables.asp#axzz1XKowDq vU http://www.accountingcoach.com/online-accountingcourse/24Xpg05.html
Article Info
Categories: Finance and Business Recent edits by: TabbyNevinz6, HighAndLoopy, Carolyn Barratt
Chi Mei™ Polymers
www.biesterfeld-plastic.com Distributor for ABS, SAN, SBS, SBD: Biesterfeld Plastic GmbH
Thanks to all authors for creating a page that has been read 24,591 times.
www.wikihow.com/Determine-Net-Accounts-Receivable
4/4
