Revenue and receivables

In most businesses, what drives the balance sheet are sales and expenses. In other words , that cause the assets and liabilities of a company. A more complicated accounting items are the accounts receivable. As a hypothetical situation , imagine a business that offers all its customers a credit period of 30 days, which is quite common in transactions between businesses, ( not transactions between a business and individual consumers ) .
An accounts receivable asset shows how much money customers who bought products on credit still need the company. It is a promise that if the company will receive . Basically , accounts receivable is the amount of revenue forgone by the end of the accounting period. Cash does not increase until the business actually collects money from its business customers . However, the amount of money in accounts receivable is included in the total turnover of sales for the same period. The company is making sales, even if it has not acquired all the money from the sale. Turnover , then is not equal to the amount of money the company has accumulated .
To get the actual cash flow , the accountant must subtract the amount of credit sales not collected by the sales revenue in cash. Then add the amount of money that was collected for the credit sales that were made during the previous reporting period . If the amount of credit sales a business made ​​during the reporting period is greater than the amount received by customers , accounting account receivable increased over the period, the company must subtract from net income that difference .
If the amount received during the reference period is greater than the credit sales made , then the accounts receivable decreased during the period, and the accountant needs to add to net income the difference between the rights of collected beginning of the period and the receivables at the end of the same period.