A receivable occurs when a business sells goods or services to another party on account
True
That is correct. When a business sells goods or services on account, it means that payment is not immediately received at the time of the sale. Instead, the buyer is allowed a certain period of time in which to pay for the goods or services. The amount owed by the buyer to the seller during this period of time is recorded as a receivable.
Receivables are recorded on a company’s balance sheet as current assets, as they are expected to be collected within a year. They can be further classified into different types, such as accounts receivable, notes receivable, and other receivables.
It’s important for businesses to monitor their receivables closely to ensure timely collection of the amount owed. If a receivable remains outstanding for too long, it can turn into a bad debt and become uncollectible, resulting in a loss for the company. Businesses may also choose to use factoring or other financing methods to convert their receivables into cash more quickly, if needed.
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