A huge part of your business, I’d even say the main focus of your business, should be making sales happen. When it’s the sales you’re doing, you’re also as a result of it, encountering accounts receivable balances. Yes, if you’re selling and receiving money right away, you don’t have receivables, but matter of fact is that most of the businesses nowadays do have receivables on their balance sheet.

As I mentioned, if you’re selling on spot and receive money right away, you won’t have receivables. Why is that? It’s the nature of the receivable really and it’s already apparent from the name itself – receivable, i.e. something is to be received. This “something” is money that you’re about to receive at a determined date from your client, the party that got the goods or services the money is to be received for. 

In accounting, after making a sale onto the income statement, the other side of your accounting entry should be debiting your receivables on the balance sheet. The entry should be something like this:

Db Accounts receivable

                  Cr Sales revenue

The above accounting entry shows that you made a sale, you gave away something and for this you will, at a later date, receive money. This receivable on the balance sheet obviously goes under assets because it’s your right to receive some form of an asset, usually money.

“Accounts receivable” are all those receivables combined. Consequently you need to keep a separate detailed ledger for all those balances that combine together into the accounts receivable on the balance sheet.