reading 41 financial analysis techniques

why adopting more aggressive revenue reconition policies possibly increases receivables

It depends on the type of policy. Suppose you send someone inventory on consignment. It’s still your inventory and should be included as such. But, suppose that your customer historically has contacted you at the end of the month to say he’s bought/sold all of the goods from you , so half way thru the month you decide to assume that will happen again and that you will recognize half the revenue now. Your entry is Receivables Revenue But in more general terms, look at the entry above. That is the standard entry used to record revenue, and for every credit there has to be a debit. The only time this might not happen is if you have unearned revenue on your balance sheet that you recognize early, resulting in a debit to the liability account.