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What type of account is Accounts Receivable?

23 Mar 2022 By PAYCEC

Accounts receivable is divided into three types: trade accounts receivable, notes receivable, and other accounts receivable

1. Trade Accounts Receivable

Trade accounts receivable usually occur because of credit sales. It arises as a result of buying goods or services on credit. In general, the payment period ranges from one to two months.

2. Notes Receivable

This accounts receivable has a physical form of a formal letter. This type of loan has a bill of between 2-3 months. Debt settlement made within that time will not be subject to interest. However, if the debtor requests an extension of the payment period, interest will be charged according to a monthly extension.

3. Other accounts receivable

This accounts receivable is of a broader type, as it includes interest receivables, salary receivables, employee advances, and tax refunds. Due to their general nature, notes can be reported separately on the balance sheet.

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