![]() ![]() If the number is positive, the company is profitable. To determine profitability, add up all your assets, including accounts receivable, and subtract your total accounts payable, or liabilities, which are what you owe to suppliers and vendors. It is considered an asset, as it represents money coming into the company. Your business’s accounts receivable is essential for calculating your profitability and providing the clearest indicator of the business’s income. Once you are paid for an invoice, you’ll debit your accounts receivable for that amount and credit your cash account. It’s the amount of money for which you’ve issued invoices but haven’t yet been paid. Sometimes referred to as A/R, “accounts receivable” is the accounting term for the money a business should receive from its customers from the sales of goods or services. Here’s how to track your accounts receivable. In other words, accounts receivable makes the difference between worrying that you don’t have enough money and staying calm in the knowledge that money will come soon. ![]() This lets you discern whether your cash account accurately reflects your current financial standing. It helps with cash flow management by telling you which clients owe you money and how much. ![]()
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