What is an Arrears Account Balance?

By QuickBooks Canada Team

1 min read

An accumulation of bills you owe is known as an arrears account balance. Whether you have accidentally missed a payment or do not have the cash flow to make a payment, an arrear is a past due amount that should have been paid earlier. This account balance is the sum of all past due invoices you owe. If there are invoices issued to you that are not yet due, this amount is not included in your arrears account balance. If you have failed to pay a $100 bill in each of the past three months because of cash flow difficulties, your arrears account balance is $300. The most common place to see an arrears account balance is in a company’s dividend account. Some businesses agree to pay all their shareholders a dividend, but they are not legally required to make a cash payment. Instead, they can delay the payment of the dividends until they have the cash. As a result, many companies have a growing accumulated dividends payable balance because they are legally required to pay their balance eventually. In general, having an arrears account balance is not good. A vendor may refuse to do business with you if you have arrears piling up. Alternatively, a hold may be placed on your assets if you do not have the ability to pay your bills. An arrears account balance typically arises when you agree to make payments on a fixed schedule, such as your monthly rent on your office building, a recurring utility bill, or fixed insurance charges.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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