Accounts receivable and accounts payable is The ratio of accounts receivable to accounts payable. Inventory of receivables and payables

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the modern world, various accounting items occupy a special place in the management of any enterprise. The material presented below deals in detail with debt obligations under the name "receivables and payables". This is one of the most relevant articles responsible for compliance with financial agreements between two organizations, since even minimal non-compliance with one's side of the agreement immediately affects the ratio of receivables to payables for each of the legal entities in question.

Debts

Circulation of economic and financial activities of any modern enterprise is the reason that there are receivables and payables. These may be funds received from settlements for any material values, services provided; as well asmanufactured and sold products in the form of all kinds of goods, etc. All the above items are reflected in accounting. Thus, receivables and payables are debt obligations of other organizations to the enterprise in question. Let's take a closer look at each of these concepts in order to more fully understand the difference between them.

Accounts payable

This term represents all kinds of debts of a particular enterprise under consideration to other legal or cooperating individuals, individual entrepreneurs and other related services. Therefore, the organization's debts to suppliers of raw materials or finished products, which will subsequently be involved in the main production process, can be safely attributed to the category described above; to contractors - for the services and works provided by them; to their own employees (wages for their work for the benefit of the enterprise). In addition, this accounting item includes various payments to off-budget and budget funds.

Accounts payable implies obligations that arise gradually and continuously as the establishment and further development of the economic activity of the enterprise in question. One of the very first debts can be considered debts to the founders. They appear at the time of the creation of the statutorycapital. Subsequently, there are all sorts of obligations to various banking institutions. It is believed that after them debts to suppliers are formed, since it is they who provide all the materials necessary to start work. Fourth on this list are performance-based tax deductions.

Accounts receivable

This concept implies all the obligations of any institutions that represent legal entities, as well as individuals acting as individuals, to the enterprise in question. In this case, the debtors are called debtors. This category traditionally includes the debts of accountable representatives for the funds issued to them; obligations of customers and buyers of finished products or services provided; loan repayments and more. It is quite natural when the ratio of receivables and payables leans in our favor. It is inherent in human psychology that it is much more pleasant to receive finance from someone than to give your hard-earned money to anyone. However, in any case, you should not rely entirely on the amounts that must be returned, because if they are not transferred on time, there is a risk that the enterprise will incur losses. Therefore, it is the responsibility of the accounting department to keep a strict record of all obligations. This means that it is necessary to control the term of accounts payable and payment of receivables.

Turnover Period

Often, financial calculations require finding the above value for the further successful functioning of the enterprise. All the data necessary for this can be taken from the periodically compiled balance sheet. Thus, the turnover of receivables and payables is subject to planning and subsequent control. The higher this indicator, the greater the positive dynamics takes place. Turnover is characterized by indicators of liquidity and quality. They illustrate the speed of the process under consideration, with which the received funds will turn into cash.

Key indicators

Evaluation of receivables and payables is carried out using turnover ratios. They are calculated as the ratio of the amount of received revenue to the average value of liabilities. In addition, the presented indicator can be calculated in days. In this case, it will characterize the period for which the funds in question make their circuit. Thus, receivables and payables are integral parts of accounting.

Receivables turnover ratio

This indicator is calculated based on the following data: revenue from goods and services sold, average debt. To find the desired coefficient, it is only necessary to divide the first value by the second. Thanks to such calculations, it is possible to find out the number of timesformation and fulfillment of obligations for the study period.

Accounts payable turnover ratio

Of course, the accounts receivable and accounts payable of the enterprise must be considered together. This will allow monitoring and taking timely measures to improve the current circumstances. An unfavorable situation is one in which the turnover ratio of accounts payable will significantly exceed the receivable.

Property inventory

Inventory of receivables and payables is necessary primarily to verify the truth of the values on the company's bank accounts. To do this, you should carefully compare your own accounting data with the values obtained from the so-called counterparties. Subsequently, an act of reconciliation of previously made calculations is drawn up, which is then sent for approval and signing to the appropriate authorities. It is important to pay attention to the fact that the above documents are not the primary point from which the inventory of receivables and payables begins, but are used only to confirm the performance of any economic activity. Indeed, during the course of the process under consideration, the financial condition of none of the parties is subject to any changes. The signing of the reconciliation act only indicates that the counterparty recognizes the existence of a debt between you.

Effectiveness of ongoing activities

Both the timing and the procedure for conducting an inventory are established by the heads of each enterprise, therefore, for different organizations, these procedures may have some differences. The so-called "controlling elite" issues an order that describes all the required actions and periods. Of course, this has nothing to do with the registration of the mandatory inventory carried out at the end of the outgoing year. The result of such activities allows you to achieve many goals. We list some of them:

1) clarification of receivables for products sold but not yet paid for (goods or services);

2) adjustment of accounts payable for the above items;

3) determination of limitation periods for each individual counterparty, while it is necessary to consider all contracts and agreements concluded between the parties represented;

4) identification of balances of other payables and receivables in relation to a specific date of the property inventory.