Trade debts/ receivables represent amounts receivable from customers against the sale of goods or rendering of services in the ordinary course of business.
Example:
A business sold goods worth USD 10,000 to a customer on credit terms i.e. the sales proceeds have not been paid by the customer. Following entry would be passed at the time of credit sale:
|
Description |
Debit |
Credit |
| Trade debts |
10,000 |
|
| Sales |
|
10,000 |
The trade debts will appear on the balance sheet as receivable from the customer.
The trade debt amount will be knocked off once customer pays off the debt.
|
Description |
Debit |
Credit |
| Bank Account |
10,000 |
|
| Trade debts |
|
10,000 |
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