Accounts Receivable
Amounts owed to a company by customers for goods or services provided on credit, representing a current asset that will convert to cash upon payment.
Accounts Receivable
Amounts owed to a company by customers for goods or services provided on credit, representing a current asset on the balance sheet.
For example, a wholesale distributor that allows customers 30 days to pay would record a $5,000 sale as an increase to accounts receivable until payment is received, at which point cash increases and accounts receivable decreases by the same amount.
Accounts receivable management involves establishing credit policies, monitoring customer payment patterns, and implementing collection procedures. Effective management balances the sales growth potential of offering credit against the risk of late payments or defaults.