Business Dictionary

Accounts Receivable

What is Accounts Receivable?

When a customer owes you money, the amount owed is recorded under the ‘accounts receivable’ account in the company’s general ledger. This accounting term is crucial because it tells your business how much money it will receive from customers, and when that money is supposed to arrive.

Accounts receivable is listed as a current asset on the company’s balance sheet, as well as on the income statement, and cash flow statement.

Accounts Receivable – Example

For example, let’s say you are a florist that sold 100 centerpieces, at $50 each, to a company for their annual event. After the event is over you sent them an invoice for $5,000, and requested that they pay the invoice within 30 days. At the same time you would also record the $5,000 amount (and when that payment is due) under ‘accounts receivable.’

Learn More

If you’d like to go even deeper and answer the question ‘Why Should A Business Owner Understand Their Gross Margin?’ then click on this link.