Revenue is related to an asset, but the difference is that an asset is s balance sheet income, and revenue is an income statement item.
Many companies provide customers with credit for the services they have provided. Thus, the amount the company is owed is called accounts receivable. However, only a few people are aware of whether accounts are receivable as an asset, and if so, why then it will be cleared as an asset. So, keep reading to find out what does assets mean, whether accounts are receivable an asset, and so on.
What Do Assets Mean?
Of course, before getting to the point, it is important to pay attention to what an asset is all about. In fact, assets are considered to be several different things, such as valuable things or resources (owned by the company), costs with a measurable future value and also prepaid expenses (which have not yet been spent).
Thus, as you already understood, many things can be attributed to assets, such as real estate, inventory, cash, vehicles, long-term investments and so on. Now we can tackle the questions of what is account receivable? Is account receivable an asset?
Is Account Receivable An Asset?
First, let’s answer the question what is an account receivable. At the moment, account receivable is defined as the money that the client owes the company. Thus, an account receivable is also considered an asset. However, why is an account receivable considered an asset?
Many people understand that it is an asset, but have no idea why. However, everything is quite simple. An account receivable is considered an asset as it is an amount that will soon be converted into cash. Thus, since money is considered an asset, and account receivable is money that the client owes, it is also considered an asset.
Is Revenue An Asset?
So, revenue is what the company will receive from the sale of products (usually adjusted for returns). Thus, revenue can be called net sales (the number of sales for a certain period minus the number of expected returns). So revenue is related to an asset, however, they are different.
So, the biggest difference between revenue and asset is that revenue is recorded over the period. Thus, an asset is s balance sheet income, and revenue is an income statement item. It is important to pay attention to the fact that assets are measured at a certain point in time, so its balance sheet will show the assets it holds at a certain point in time.
Is Account Receivable Revenue?
It is rather difficult to answer the question of whether accounts are considered receivable as revenue. This is often determined by the accounting method used by your business. Thus, on a cash basis of accounting, only transactions resulting in cash being paid are revenue. Thus, in this case, accounts receivable will not be considered revenue.
However, if your business uses the accrual basis of accounting, then revenue is understood as cash that goes into your business after the sale. Thus, in this case, accounts receivable is considered revenue.
Account Receivable Asset Or Liability?
In order to answer this question, let’s also first understand what asset is and what liability is. So liability is what you owe to someone else, and assets are what you own. That is why accounts receivable are considered an asset, not a liability.
Important! When examining your ledger, it is important to include accounts receivable as an asset.
Notes Payable Asset Or Liability?
Notes payable are shift agreements in which one party agrees to pay the other a certain amount of utility cash. Thus, a note payable can also be called a kind of loan between two parties. Notes payable contains information such as the amount to be paid, the name of the payee and payer, the interest rate, the maturity date, and the signature with the date.
On the balance sheet, notes payable are displayed as current liabilities (when the amounts are due with a year if more than one year – then it is long-term liabilities). Thus, notes payable is a liability but notes receivable is an asset.