Accounts receivable is the money owed to a business for the sale of goods or services already delivered. It is a type of short-term credit that a company extends to a customer by creating an invoice or bill to be paid at a later date. Accounts receivable are considered an asset and are listed as such on a business’s balance sheet.
What does Accounts Receivable stand for?
In accounting, the term “receivables” means that a business has made a sale, but hasn’t yet received the proceeds from that sale. Accounts receivable, abbreviated as AR, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not yet paid for. These are generally in the form of invoices raised by a business and delivered to the customer for payment. Accounts receivable are shown in a balance sheet as an asset.
When is Accounts Receivable Created?
Accounts receivable are created any time money is owed to a firm for services rendered or products provided that have not yet been paid. This can be from a sale to a customer on store credit, or a subscription or installment payment that is due after goods or services have been received.
What are the Benefits of Accounts Receivable?
Accounts receivable is an important aspect of a business’s fundamental analysis. Accounts receivable is a current asset so it measures a company’s liquidity or ability to cover short-term obligations without additional cash flows. Analysts often evaluate accounts receivable in the context of turnover, which measures the number of times a company has collected on its accounts receivable balance during an accounting period.
What are The Types of Accounts Receivable?
There are three types of account receivables that a company will have. These include accounts receivable, notes receivable, and other receivables. Accounts receivable usually occur because of credit sales and arise as a result of buying goods or services on credit. Notes receivable are normally in the form of a letter and this type of loan has a bill of between 2 to 3 months. Other receivables include interest receivables, salary receivables, employee advances, and tax refunds.
Where Can I Find a Company’s Accounts Receivable?
You can find a company’s accounts receivable on its balance sheet. Accounts receivable appears under current assets because it represents money customers owe the business for goods or services already delivered. The balance sheet will usually show the total AR amount, and detailed breakdowns (like which customers owe what and how long invoices are overdue) are often kept in the company’s accounting system or reports such as an AR aging report.
Accounts Receivable in QuickBooks
In QuickBooks, Accounts Receivable is tracked through customer invoices and payments and summarized by the AR Aging Summary report, which groups outstanding balances into aging buckets (current, 1–30, 31–60, 61–90, 90+ days). The AR Aging Summary provides a snapshot of total receivables by customer and age, highlights overdue accounts that need collection attention, and can be customized by date range, aging intervals, and customer filters. It also links back to individual invoices in QuickBooks software so you can quickly investigate balances, generate collection letters, export data for further analysis, and monitor trends in receivables turnover and bad-debt risk.
What Happens If a Customer Doesn’t Pay an Account Receivable?
When a customer does not pay an account receivable and it becomes clear that the account receivable won’t get paid by the customer, it has to be written off as a bad debt expense or one-time charge.
Accounts Receivables vs. Accounts Payable?
Accounts receivable and accounts payable differ in that they are on opposite sides of the balance sheet. Accounts receivable is money that is owed to a company by a customer and is considered an asset. Accounts payable, on the other hand, is money your company is obligated to pay and is considered a liability.
Is Accounts Receivable the same as Accounts Payable?
Accounts receivable are not the same thing as accounts payable. As mentioned before, accounts receivable are credits made to customers for goods and services and are considered assets, while accounts payable are debts incurred by a company and are considered a liability.
Summary of Accounts Receivable
Accounts receivable is a key current asset that represents sales made on credit and directly affects a business’s cash flow and liquidity; managing AR carefully—through timely invoicing, regular aging reviews, and proactive collections—helps protect revenue, reduce bad-debt risk, and keep the company financially healthy.
