Glossary · Accounting
Accounts receivable (AR)
Also called Receivables, Debtors, Trade debtors
Accounts receivable is the money customers owe a business for goods or services delivered on credit and invoiced but not yet paid.
Accounts receivable (AR) — “debtors” or “trade debtors” in UK usage — is the total of unpaid customer invoices. It sits on the balance sheet as a current asset, because it is expected to turn into cash within a year.
AR is an asset only if it is collected. Its quality depends on how old it is and who owes it, which is why businesses track it by customer and by age in an aging report, and measure how long it takes to collect with DSO.
For a service business, receivables are often the largest asset it has. Managing them — invoicing promptly, following up consistently, resolving disputes — is the work of credit control.
Example
At month end a consultancy has 23 unpaid invoices totalling €142,000. That is its accounts receivable; €31,000 of it is past due.