Why can't Accounts Receivable ever have a credit balance? Why can't Accounts Payable ever have a debit balance.
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
Expert Solution
Step 1 Concept of Accounts Receivable and Account Payable
Whenever goods are sold on account that is cash to be received in future from debtor we get an accounts receivable. It is pertinent to note that cash receivable is nothing but getting an economic benefit to the entity . As per the definition of an asset, it is resource that is controlled by an entity that can be used in production or realized through sales and hence we can conclude that Accounts recievable is an asset
Similarly, when raw materials or goods are purchased on account that is we need to pay cash in future . Here we have an obligation to pay cash . As per the definition of a liability it is an obligation that require outflow of future economic benefits from the entity. Hence we can conclude that accounts payable is a liability
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