How to Calculate Net Accounts Receivable

Account receivable is the amount which we have to take from our customers when we sell goods to them on credit. When we have sold goods on credit, it is not sure, we will get whole the amount of account receivable because if our customer is not honest or he will become insolvent or he will go underground by consuming our sold goods on credit, it is the chance, our whole or some money of account receivable will become bad debt. So, to calculate the net account receivable on the basis of past behavior of our customers will be helpful for us to use our working capital effectively.

Here, we are explaining its simple steps:

1st Way : 

1st Step : To Calculate the Estimated Amount of Bad Debt 

For calculating the net account receivables, we have to calculate the estimated amount of bad debt. This calculation is done on the basis of past experience.

For example, after evaluating past Bad Debts account, we have reached on the calculation that there is the chance of 10% bad debts. So, if there are $ 1,00,000 account receivables, then we have chance to collect money of $ 90,000.

2nd Step : To Calculate the Current Value of Bad Debts

Current value of bad debts can be calculated on the basis of current behavior of our customer. If we have opened our all customers' account, we have to classify it on basis of payment period. There are some customers who have paid within 30 days, there are some customers who have paid within 60 days and still there are some customers who did not paid after expiring of 120 days. If we have a clear policy when we make any uncollected debt as bad debt, we can calculate the value of bad debt. For example, as per our policy, we have can make any debt as bad debt if we have not received within 60 days.

Now, we will reach the net account receivables if we we deduct these current bad debts. In above example, we have $ 90,000 and as per our calculation, our current value of bad debts are $ 20,000, then our balance net account receivable will be $ 70,000.

2nd Way : 

In second way, we have to calculate weighted % of actual invoices paid within our customers' aging period.Then this weighted % will multiply with total no. of account receivables for calculating net account receivables.

Invoices presented : Invoices paid by customer

$ 1,00,000 : $ 90,000

90% paid

Invoices presented : Total no. of invoices

$ 1,00,000 : $ 2,00,000


weighted % of net paid of invoices by customers.

50% of 0.90

= 0.45 or 45%

So, if total account receivables are $ 2,00,000, then net account receivable which will receive, will be $ 90,000

See also 

» How to Manage Account Receivables
» How to Decrease Average Collection Period
» How to Calculate Average Days' Sales Uncollected

Category : Step by Step Accounting Guide 






access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: How to Calculate Net Accounts Receivable
How to Calculate Net Accounts Receivable
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock