Accounts receivable

Meaning

Accounts receivable (الذمم المدينة) is the total of unpaid customer invoices, less credit notes and payments on account. It is a current asset on the balance sheet and a control account in the ledger, behind which the customer sub-ledger holds each customer's statement. Revenue is recognised when the invoice is issued, so receivables are the gap between what has been earned and what has been collected.

The ageing report splits the balance into current, 30, 60 and 90-plus days overdue and is the collections team's work list. Debts unlikely to be paid are covered by an allowance for doubtful debts, which reduces receivables and is a zakat-return adjustment until the debt is actually written off. VAT on an invoice that is never paid can be reclaimed as bad-debt relief once the conditions in the regulations are met.

Also called: receivables · debtors · AR · الذمم المدينة

Example

Al Noor invoiced 42,000.00 in October and collected 7,665.00, so receivables rose by 34,335.00. Its ageing shows 11,385.00 current, 22,950.00 at 30 days and 7,665.00 over 60 days; the statement sent to each customer on the first of the month lists the open invoices.