What do you understand by the term ‘trade receivable’?
The term ‘trade receivables’ is the amount receivable for sale of goods or services performed in the ordinary course of business operation. It is the sum of debtors and bills receivable.
- Debtor: A debtor is a person who receives a benefit without paying money immediately but liable to pay in future within a particular period of time.
- Bills receivable: Bill receivable is an exchange bill accepted by the debtor for the amount which will be received on a specified date. It is included in trade receivables because bill receivable replaces a debtor.
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