Accounts Receivable (AR)

Accounting

Money owed to a business by its customers for goods or services delivered but not yet paid.

Detailed Explanation

Accounts receivable represents the outstanding invoices a company has or the money clients owe. It's recorded as a current asset on the balance sheet because it represents cash expected to be received within a year. Effective AR management is crucial for maintaining healthy cash flow. Businesses track AR aging to monitor how long invoices remain unpaid and follow up on overdue accounts. High AR can indicate cash flow problems or collection issues.

Examples

  • A company has $50,000 in accounts receivable from unpaid invoices
  • The accounting department monitors AR to ensure timely collections

Related Terms

Invoice Accounts Payable (AP) Overdue Invoice Payment Terms

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