Accounts Receivable

Accounts receivable is the money customers owe a company for goods or services already delivered but not yet paid for. It sits on the balance sheet as a current asset, because those invoices are supposed to convert to cash within the payment terms, typically 30 to 90 days.

Receivables are revenue's shadow. Under accrual accounting a sale gets booked when the product ships, not when the check clears, so a company can report growing revenue while the cash stays stuck in unpaid invoices. Receivables growing much faster than sales is a classic earnings-quality warning: it can mean loosened credit terms, channel stuffing, or customers in trouble.

Some receivables never collect. Companies carry an allowance for doubtful accounts against the gross balance; an allowance shrinking while receivables balloon is aggressive accounting.