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Is Account Receivable a Current Asset?

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Examples of Accounts Receivables as Current Asset

Example #1

Garaner’s Company sells $1,200 of gems jewelry to a retailer on credit. The retailer has 60 days to pay the full $1200. Garaner’s Company will decrease its inventory by $1,200 and increase accounts receivable by $1,200. After 60 days, once the retailer pays the £1200, the Company will increase its cash balance by $1,200 and decrease its accounts receivable by $1,200. The receivable here is a current asset as they made a realization in less than one year.

Example #2

Abc limited sold 100 boxes of cartilage to Mr. Smith and gave 60 days credit terms. This outstanding amount is an asset, as it will appear on the balance sheet as receivable. Further, since the amount will be received in less than one year, it will be classified as a current asset. When the seller transfers goods to Mr. Smith, he will record sales and book receivable amounts against Mr. Smith.

Example #3

Fresh mango company sold two dozen boxes of mangoes to Ms. Riya. One dozen boxes were sold for cash and another for credit of 90 days. Here the seller will record cash sales for one dozen boxes, and another will be raised as receivable. The receivable would be shown as a current asset as the realization would happen in less than one year.

Example #4

Company XYZ sells $100 million of bearing parts to an auto manufacturer and gives that customer 60 days. Once Company XYZ receives the order, it will decrease its inventory by $100 million and increase its accounts receivable by $1 million. When 60 days have passed and payment is received, it will increase cash by $100 million and reduce its accounts receivable by $100 million.