{"id":"concept:accounts-receivable","kind":"concept","label":"Accounts Receivable","synonyms":["AR","receivables"],"definition":"Accounts Receivable is money customers owe for work already delivered and invoiced, real and yours, but not yet actually collected.","summary":"The mirror of Accounts Payable — what customers owe you, rather than what you owe others. Issuing a $2,000 invoice debits Accounts Receivable and credits revenue immediately, on an accrual basis, well before the customer's payment actually lands in the bank.","explanation":["Accounts Receivable is the asset that represents money customers genuinely owe for work already delivered — real and belonging to the business, but not yet collected. The moment an invoice is sent, before a single dollar arrives, that amount belongs here, on an accrual basis: the sale is recognized when the work is done and billed, not when the customer eventually pays.","As an asset, Receivable carries a normal debit balance. Issuing an invoice debits this account and credits revenue at the same moment. When payment finally arrives, it debits cash and credits Receivable back down — with no new revenue recognized a second time, since the income was already booked when the invoice was issued.","A growing Receivable balance alongside strong reported revenue is worth watching closely. It usually means the business is doing well on paper but isn't yet collecting the cash to match — exactly the kind of gap that can make a profitable-looking business run short on actual cash. This is one of the clearest signals of how quickly a business is turning sales into money it can actually spend.","Whether a customer's unpaid invoice ever needs to be written off as uncollectible is a separate, real question — a bad-debt write-off reduces Receivable and typically hits an expense account rather than reversing revenue, and it depends on accounting method and situation in ways worth confirming with an accountant before recording anything."],"commonMistakes":["Assuming sending an invoice is the same as being paid — on an accrual basis it recognizes revenue immediately, but the cash itself may not arrive for weeks.","Ignoring a growing Receivable balance next to strong reported revenue — it can signal a real, developing cash crunch even while the P&L looks healthy.","Writing off an unpaid invoice without confirming the right treatment with an accountant — the correct approach depends on accounting method and situation."],"category":"accounts","questions":[{"question":"Does sending an invoice count as income right away?","answer":"On an accrual basis, yes — revenue is recognized when the invoice is issued, with the amount sitting in Accounts Receivable until the customer actually pays."},{"question":"What if a customer never pays an invoice?","answer":"That's a bad-debt write-off, reducing Accounts Receivable and typically hitting an expense account. It depends on your accounting method — confirm the right treatment with an accountant before writing anything off."}],"url":"/glossary/accounts-receivable","relatedTo":[{"id":"concept:revenue-recognition","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Arevenue-recognition"},{"id":"concept:accrual-basis","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aaccrual-basis"},{"id":"concept:accounts-payable","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aaccounts-payable"},{"id":"concept:cash-flow","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Acash-flow"},{"id":"account:1200-accounts-receivable","relationship":"references","weight":0.7,"api":"/api/knowledge/account%3A1200-accounts-receivable"},{"id":"guide:what-cash-flow-tells-you-that-profit-and-loss-doesnt","relationship":"references","weight":0.7,"api":"/api/knowledge/guide%3Awhat-cash-flow-tells-you-that-profit-and-loss-doesnt"}],"referencedBy":[{"id":"concept:accrual-basis","label":"Accrual Basis","url":"/glossary/accrual-basis"},{"id":"concept:revenue-recognition","label":"Revenue Recognition","url":"/glossary/revenue-recognition"},{"id":"concept:accounts-payable","label":"Accounts Payable","url":"/glossary/accounts-payable"}],"license":"https://creativecommons.org/licenses/by/4.0/","attribution":"BalanceMCP — https://balancemcp.com"}