What are Net Receivables?

Net Receivables

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Net Receivables

Net receivables is a term used in accounting to refer to the total money owed to a company by its customers, minus any allowance for doubtful accounts.

In other words, net receivables is the total amount of money the company expects to actually collect from its customers. This figure is important because it gives a more accurate picture of the cash inflows a company can expect to receive.

The formula to calculate net receivables is:

Net Receivables = Accounts Receivable – Allowance for Doubtful Accounts


The net receivables figure is typically reported on the balance sheet under current assets, as these are amounts expected to be collected within one year. If the allowance for doubtful accounts increases significantly over time, it may indicate that the company is having difficulty collecting payments from its customers, which could impact its cash flow and financial stability.

Example of Net Receivables

Let’s consider a hypothetical company, JKL Manufacturing.

Suppose JKL Manufacturing reported the following:

  • Total Accounts Receivable: $500,000 (This is the total amount its customers owe for purchases made on credit.)
  • Allowance for Doubtful Accounts: $20,000 (This is the amount JKL Manufacturing estimates it won’t be able to collect.)

To calculate the net receivables, we subtract the Allowance for Doubtful Accounts from the Total Accounts Receivable:

Net Receivables = Total Accounts Receivable – Allowance for Doubtful Accounts

So, for JKL Manufacturing:

Net Receivables = $500,000 – $20,000 = $480,000

So, JKL Manufacturing’s net receivables amount to $480,000. This is the amount JKL Manufacturing expects to actually collect from its customers. It’s an important figure as it indicates the actual cash inflow JKL Manufacturing can expect to receive, which can be used for its operating expenses, investments, debt payments, or other business activities.

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