Accounts Receivable - AR

Accounts Receivable - AR

Money that customers (individuals or corporations) owe a company in exchange for its goods or services. 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 up to one year.

Notes:

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.

See also: Accounts Payable, Balance Sheet, Net Receivables, Receivable Turnover Ratio