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What Are Accounts Receivable?

Accounts receivable refers to an uncollected claim for payment that arises when goods or services have already been provided but payment has not yet been received.

What the item represents

Accounts receivable is an item classified under current assets on the balance sheet. It represents a claim that arises when a company has already delivered goods or completed a service but has not yet received payment for it.

Points to watch when reading it

Checking the ratio of accounts receivable to revenue, as well as the average time it takes to collect them (the receivables turnover period), can serve as a reference point for assessing the state of collections and the credit risk of customers.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Is a high level of accounts receivable a risk?
Accounts receivable are assets expected to eventually be collected as cash, but they also carry the risk that collection could be delayed or become uncollectible (bad debt). It's useful to check whether receivables are increasing disproportionately relative to revenue.
How do accounts receivable differ from notes receivable?
Both represent a right to receive payment, but accounts receivable are a contractual claim, whereas notes receivable take the form of a negotiable instrument (a promissory note or bill).

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