Accounts receivable represent money owed to a business by its customers for goods or services delivered but not yet paid for. They are considered a current asset on the balance sheet as they are expected to be converted into cash within one year.
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Accounts receivable are recorded when a sale is made on credit.
They are classified as current assets because they are generally expected to be collected within one year.
Managing accounts receivable efficiently can improve a company's liquidity and cash flow.
The allowance for doubtful accounts is used to estimate the portion of receivables that may not be collectible.
Financial ratios such as the accounts receivable turnover ratio help assess how efficiently a company collects its receivables.