What is accounts receivable in accounting?

Accounts receivable is any amount of money your customers owe you for goods or services they purchased from you in the past. This money is typically collected after a few weeks and is recorded as an asset on your company’s balance sheet. You use accounts receivable as part of accrual basis accounting. Where do I find accounts receivable?

How long does an account receivable have to be paid?

Though specific terms vary, an account receivable is typically set to be paid anywhere from one day to one year of the invoice date. A broader accounts receivable definition refers generally to any money owed to a company – any unpaid invoices define accounts receivable of a company.

What is a trade receivable?

Trade receivables are only those receivables generated through the ordinary course of business, such as amounts that customers owe in exchange for goods shipped to them. The accounts receivable classification is also comprised of non-trade receivables, which is a catchall for any other type of receivable.

Why are accounts receivables prized by lenders?

Receivables are prized by lenders, because they are usually easily convertible into cash within a short period of time. As an example of accounts receivable, a farm supply business sells a tractor to a farmer for $75,000. The sale is on credit.