Accounts Receivable
Money owed to a business by its customers for goods or services already delivered but not yet paid for.
Also: AR · debtors
Definition
Accounts receivable (AR) represents money owed to a company by its customers for products delivered or services rendered on credit. AR is recorded as a current asset on the balance sheet and represents a claim for payment. Companies monitor AR aging (how long invoices have been outstanding) to identify collection issues. Accounts receivable turnover ratio measures how efficiently a company collects payments. Poor AR management can cause cash flow problems even when a business is profitable on paper.
Example
“A consulting firm completes a $50,000 project in December and invoices the client; the $50,000 appears as accounts receivable until the client pays in January.”
Usage Examples
- 1
“The team applied accounts receivable best practices to improve their accounting outcomes significantly.”
- 2
“Understanding accounts receivable is essential for anyone building a career in Finance.”
When & How to Use
Use 'Accounts Receivable' when working in Accounting contexts where accounts receivable (ar) represents money owed to a company by its customers for products delivered or services rendered on credit.
- ▸Applying accounts receivable principles during a accounting project or initiative
- ▸Explaining accounts receivable to a junior team member or stakeholder unfamiliar with Finance
- ▸Evaluating options or proposals using accounts receivable as a decision-making criterion
Etymology & Origin
The term 'Accounts Receivable' derives from Latin roots and entered Finance professional usage as the field formalised in the 20th century.
History & Evolution
The concept of accounts receivable has evolved alongside Finance. Early practitioners relied on informal methods; structured approaches emerged with the professionalisation of accounting in the mid-20th century. Today, accounts receivable is a standard part of Finance practice globally.
Synonyms
- trade receivables
- debtors
- money owed
- outstanding invoices
Antonyms / Opposites
- accounts payable
- creditors
Images
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Related Terms
- accounts-payable
- cash-flow-statement
- working-capital
- bad-debt