Accounts Receivable: Meaning & Debtor Days
Definition
Accounts receivable is the money customers owe a business for goods or services already supplied on credit. It is shown as trade receivables (debtors) under current assets.
| Term | Accounts receivable |
|---|---|
| In Hindi | प्राप्य खाते (देनदार) |
| Area | Accounting |
| Search phrase | accounts receivable meaning |
| Try it | Receivables and cash flow |
प्राप्य खाते (देनदार) — हिंदी में अर्थ
प्राप्य खाते वह राशि है जो ग्राहकों को उधार पर दिए गए माल या सेवा के बदले व्यवसाय को चुकानी है। बैलेंस शीट में इसे चालू संपत्ति में देनदार (trade receivables) के रूप में दिखाया जाता है।
Receivable vs payable
Accounts receivable is money coming in from customers (an asset); accounts payable is money going out to suppliers (a liability). Both are working capital, and the gap between them decides how much cash the business needs.
Debtor days
Debtor days = Trade receivables ÷ Credit sales × 365. If receivables are ₹30 lakh on credit sales of ₹1.8 crore, debtor days = 61 — customers take about two months to pay.
Example
Invoice of ₹1,18,000 raised on 1 June with 30-day terms is a receivable until paid; on 1 July it becomes overdue.
Related tools and guides
Frequently asked questions
What is accounts receivable?
Amounts owed by customers for credit sales — an asset in the balance sheet.
Is accounts receivable the same as debtors?
Yes. Sundry debtors, trade receivables and accounts receivable mean the same thing.
How can receivables be reduced?
Clear credit terms, prompt invoicing on dispatch, regular statements and follow-up on an ageing report.
What is an ageing report?
A list of receivables grouped by how long they are outstanding — 0–30, 31–60, 61–90, 90+ days.
Related terms
- Accrual vs cash basis of accountingUnder the accrual (mercantile) basis, income and expenses are recorded when they are earned or incurred, whatever the payment date. Under the cash basis, they are recorded only when cash is actually received or paid.
- Balance sheetA balance sheet is a statement of what a business owns (assets) and what it owes (liabilities and owners' equity) on a particular date. Total assets always equal total equity plus liabilities.
- Cash conversion cycleThe cash conversion cycle (CCC) is the number of days between paying for raw material and collecting cash from the customer for the finished goods: days inventory outstanding plus days sales outstanding minus days payables outstanding.
- Contra entryA contra entry is a transaction between cash and bank accounts of the same business — such as cash deposited into the bank or cash withdrawn for office use — where both the debit and the credit side are cash or bank.
- Contribution marginContribution margin is selling price minus variable cost. It is the amount each sale contributes first towards fixed costs and then to profit; as a percentage of sales it is called the contribution margin ratio or P/V ratio.
- Cost of goods sold (COGS)Cost of goods sold (COGS) is the direct cost of the goods a business sold in a period: Opening stock + Purchases + Direct expenses − Closing stock.