accounts receivable

Accounts Receivable - AR

Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used but not yet paid for. Accounts receivable usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days or weeks to a year.

Investopedia Commentary

If a company has receivables, it means it has made the sale but has yet to collect the money from the purchaser. Most companies operate by allowing some portion of their sales to be on credit. These sales are usually to frequent customers, who are invoiced periodically, allowing them to avoid the hassle of physically making payments as each transaction occurs.

If you look at the balance sheet of a public company, you will usually see accounts receivable recorded as an asset, since it represents a legal obligation for the customer to remit cash for its debts. Conversely, when a company owes debts to its suppliers or other parties, these are known as accounts payable.

Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their employers on a monthly or bi-weekly basis in the form of a paycheck. They are legally owed this money for services (work) provided.

Related Links

Reading The Balance Sheet
Measuring Company Efficiency
What Is A Cash Flow Statement?
How Some Companies Abuse Cash Flow

See also: Accounts Payable - AP, Balance Sheet, Credit, Line of Credit - LOC, Net Receivables, Receivable Turnover Ratio

Also spelled: Receivable, receivables, receivabel, recievable, recievabel, recievabelsAR

accounts receivable

Money owed to a business by customers who have bought goods or services on credit. Accounts receivables are current assets that continually turn into cash as customers pay their bills. Also called receivables.