Accounts receivable - ar, Accounting Basics

Money payable by customers (individuals or corporations) to the other entity in exchange for goods or services that have been given or used, but not yet paid for. Receivables typically come in the form of operating lines of credit and are generally due within a comparatively short time period, varying from a few days to a year. 

On a public company's balance sheet, accounts receivable is frequently entered as an asset as this presents a legal obligation for the customer to pay cash for its short-term debts

If a company has receivables, this shows it has made a sale but has still to collect the money from the buyer. Most companies function by allowing a little portion of their sales to be on credit. This kind of sales are generally made to frequent or special customers who are invoiced regularly, and allows them to evade the hassle of physically making payments as every transaction takes place. In other words, this is when a customer provides a company an IOU for goods or services previously received or rendered.

Accounts receivable are not restricted to businesses - individuals have them too. People get receivables by their employers in the form of a bi-weekly or monthly paycheck. They are legally paid this money for services (work) already given. 

When a company pays debts to its suppliers or other parties, these are referred to as accounts payable.




Posted Date: 7/27/2012 3:46:12 AM | Location : United States

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