Like most businesses, when Falcon Company renders services to another business, it is typical that the service

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Like most businesses, when Falcon Company renders services to another business, it is typical that the service is rendered "on account," rather than as a cash transaction. As a result, Falcon Company has an account receivable for the service provided. Likewise, the company receiving the service has an account payable for the amount owed for services received. At a later date, Falcon Company will receive cash from the customer to satisfy the accounts receivable balance. However, when individuals conduct transactions with each other, it is common for the transaction to be for cash. For example, when you buy a pizza, you often pay with cash.
Why is it unusual for businesses such as Falcon Company to engage in cash transactions, while for individuals it is more common?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Accounting

ISBN: 978-0324188004

21st Edition

Authors: Carl s. warren, James m. reeve, Philip e. fess

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