Breaking Down the Accounting behind Receivables

This post originally appeared on Trade Financing Matters

We all probably remember taking high school accounting and the thrills of being lectured on income statements, debits and credits, and accounting standards and the like. Typically, if it’s not your gig, you have long forgotten this information. But while forgettable, accounting is a key cog in our society, for reporting personal and corporate taxes, for assessments for loans, and for understanding company financial statements.

In the business world, accounting is one discipline of study that all people, regardless of job position, should have some knowledge on. Its concepts can be applied to many job specialties.

Since the Enron and WorldCom crisis when independent auditor Arthur Anderson failed to report illegal accounting practices, the SEC has been monitoring public corporations more closely. Thus, we all should have some basic knowledge of accounting, especially as the interest in financing trade receivables by third parties is as high as ever.

More than ever Receivables are being used to raise cash. When you think of a sale, it’s pretty simple: Debit “accounts receivable” and credit “credit sale.”

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