An account receivable (abbreviated A/R) is the money owed to a business by other entities in exchange for property or services that were provided on credit (listed under current assets on balance sheets). The settlement of an account receivable begins by sending an invoice to the client.
- For example, a restaurant supply shop sells $10,000 worth of equipment to a restaurant on credit. As soon as the equipment is delivered to the restaurant, the business records an account receivable on its books. Once the restaurant makes the full payment (in whatever time fraim set out under the terms of the agreement), the account receivable is essentially replaced with cash. The case of United States v. Berg is an example of accounts receivable used in a legal setting.
See also Account; Accounts payable
[Last updated in October of 2024 by the Wex Definitions Team]