Definition
Accounts Receivable (AR) is an asset account that records the amounts owed to a business by its customers. It is the amount of money that a business has a right to receive from its customers for goods or services that have been provided on credit.
Importance
Accounts Receivable is an important part of a business’s financial health. It is a key indicator of the company’s ability to collect payments from its customers. It is also a key component of the company’s cash flow, as it is the money that is owed to the company and can be used to pay for expenses or reinvest in the business.
Example
For example, a company sells products to its customers on credit. The company will record the amount of the sale in its Accounts Receivable account. When the customer pays the invoice, the company will record the payment in its Accounts Receivable account and the amount will be reduced.
Table
Accounts Receivable (AR)
Debit Credit
