Accounts Receivable - AR
 |
Definition of '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. Receivables 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 to a year.On a public company's balance sheet, accounts receivable is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts |
 |
Investopedia explains 'Accounts Receivable - AR'If a company has receivables, this means it has made a 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 type of sales are usually made to frequent or special customers who are invoiced periodically, and allows them to avoid the hassle of physically making payments as each transaction occurs. In other words, this is when a customer gives a company an IOU for goods or services already received or rendered.Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their employers in the form of a monthly or bi-weekly paycheck. They are legally owed this money for services (work) already provided. When a company owes debts to its suppliers or other parties, these are known as accounts payable. |
Related Definitions
Articles Of Interest
-
Small Business: Speed Up Receivables To Avoid A Cash Crunch
Waiting for customers to pay can be a losing game. Look to factoring for quicker cash. -
The Working Capital Position
Learn how to correctly analyze a company's liquidity and beat the average investor. -
Reading The Balance Sheet
Learn about the components of the statement of financial position and how they relate to each other. -
Measuring Company Efficiency
Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period. -
Breaking Down The Balance Sheet
Knowing what the company's financial statements mean will help you to analyze your investments. -
What Is A Cash Flow Statement?
Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports. -
Understanding The Cash Conversion Cycle
Find out how a simple calculation can help you uncover the most efficient companies. -
When Wholesale Funding Goes Bad
The wholesale funding process is extremely dependent on the credit markets. Therefore, it is not always the best option for a business. -
Cash Flow On Steroids: Why Companies Cheat
Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it. -
What happens if a company doesn't think it will collect on some of its receivables?
The accounts receivable account, or receivables for short, is created when a company extends credit to a customer based on a sale. However, there are times when a company will not collect on ...
Free Annual Reports