Accounts Receivable

What is Accounts Receivable?

Accounts receivable refers to the money owed to a business by its customers for products or services delivered but not yet paid for. It is recorded as a current asset on the balance sheet because it represents a legal claim to cash in the near future.

Why It Matters

• It is a primary indicator of a company’s ability to generate cash from its sales operations.

• Efficient collection of receivables improves liquidity and reduces the need for external financing.

• Monitoring these balances helps identify customers who may be struggling to pay their bills.