{"id":1801,"date":"2023-08-15T15:39:55","date_gmt":"2023-08-15T12:39:55","guid":{"rendered":"https:\/\/akaunting.com\/hc\/?post_type=glossary&#038;p=1801"},"modified":"2024-08-29T15:34:42","modified_gmt":"2024-08-29T12:34:42","slug":"accounts-receivable","status":"publish","type":"glossary","link":"https:\/\/akaunting.com\/hc\/terms\/accounts-receivable\/","title":{"rendered":"Accounts Receivable"},"content":{"rendered":"<div id=\"akaunting-terms\">\n\n\n<p class=\"entry-paragraph\">Accounts Receivable (AR) is the money that the business expects to receive from its customers or clients for the goods or services that they have provided on credit.<\/p>\n\n\n\n<p class=\"entry-paragraph\">Accounts receivable is a current asset on the balance sheet, meaning it is expected to be received within a year or less.<\/p>\n\n\n\n<p class=\"entry-paragraph\">Some of the features of accounts receivable are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"entry-paragraph\">Accounts receivable are created when the business issues an invoice to the customer or client and are collected when the invoice is paid.<\/li>\n\n\n\n<li class=\"entry-paragraph\">Accounts receivable may offer different credit terms, such as discounts for early payment or penalties for late payment, to encourage customers to pay faster.<\/li>\n\n\n\n<li class=\"entry-paragraph\">Accounts receivable are part of the cash flow from operating activities on the statement of cash flows and show the change in receivables from one period to another.<\/li>\n<\/ul>\n\n\n\n<p class=\"entry-paragraph\">Managing accounts receivable is crucial for maintaining a healthy cash flow and maximizing profitability. Timely collection of accounts receivable not only improves the business&#8217;s liquidity but also minimizes the risk of bad debts.<\/p>\n\n\n\n<p class=\"entry-paragraph\">Additionally, offering diverse <a href=\"https:\/\/akaunting.com\/blog\/net-30-payment-terms\" rel=\"noreferrer noopener\" class=\"entry-links\" target=\"_blank\">credit terms<\/a> can help attract more customers and boost sales.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-71412e31b617fe538389e3920d835250\" style=\"color:#424242\">Is accounts receivable a liability or expense?<\/h2>\n\n\n\n<p class=\"entry-paragraph\">Accounts receivable is classified as asset account and does not fall under the categories of liability or expense. Essentially, it represents the amount of money a business anticipates receiving from their customers or clients for goods or services provided on credit.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-c599f071cec50c93ed7d4ce57f24b9a4\" style=\"color:#424242\">What are accounts receivable examples?<\/h2>\n\n\n\n<p class=\"entry-paragraph\">Some examples of accounts receivable are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"entry-paragraph\">A retail store that offers clothing and accessories to its customers on credit. The store keeps track of these sales as accounts receivable until the customers fulfill their payment obligations.<\/li>\n\n\n\n<li class=\"entry-paragraph\">A consulting firm that provides professional services to its clients on a project basis. The firm invoices the clients after completing the work and records the invoices as accounts receivable until the clients pay them.<\/li>\n\n\n\n<li class=\"entry-paragraph\">A company that offers loans to both individuals and businesses. When borrowers receive the funds, the company records the principal and interest amounts as accounts receivable until repaid.<\/li>\n\n\n\n<li class=\"entry-paragraph\">A subscription-based company that offers online services or products to its customers monthly or annually. The company charges the customers in advance and records the fees as deferred revenue, a type of accounts receivable until the services or products are delivered.<\/li>\n<\/ul>\n\n\n<\/div>","protected":false},"menu_order":0,"template":"","letter":[19],"class_list":["post-1801","glossary","type-glossary","status-publish","hentry","letter-a"],"acf":[],"_links":{"self":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1801","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/types\/glossary"}],"version-history":[{"count":14,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1801\/revisions"}],"predecessor-version":[{"id":2919,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/glossary\/1801\/revisions\/2919"}],"wp:attachment":[{"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/media?parent=1801"}],"wp:term":[{"taxonomy":"letter","embeddable":true,"href":"https:\/\/akaunting.com\/hc\/wp-json\/wp\/v2\/letter?post=1801"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}