How to Record a Payment Received in Business Accounting
Recording a Payment Received in Business Accounting
Assuming that one of the retailers that received FUBU apparel mentioned in question 3 just paid for $30,000 worth of the apparel to FUBU. On that payment receipt day, FUBU recorded:
The $30,000 payment received by FUBU from the retailer would be recorded as an increase in FUBU's cash or accounts receivable. Simultaneously, there would be a decrease in FUBU's inventory account by the cost of the sold apparel.
Explanation
When the retailer pays $30,000 to FUBU for their apparel, this transaction would be recorded in FUBU's accounting records. In terms of business accounting, this payment increases FUBU's cash or accounts receivable by $30,000. At the same time, FUBU's inventory account would decrease by the cost of the apparel that was sold. This is how revenue and expense transactions are recorded in a company's accounts. By doing so, FUBU can monitor its financial situation and measure its economic performance.
How does FUBU record a payment received from a retailer for apparel purchased? FUBU would record the payment received from a retailer for apparel purchased as an increase in cash or accounts receivable, and a decrease in inventory corresponding to the cost of the sold apparel.