Accounts receivable (AR) is money customers owe a business for goods or services already delivered on credit. It is recorded as a current asset on the balance sheet. SEC Regulation S-X requires registrants to state receivables from customers (trade) separately (17 CFR 210.5-02, Regulation S-X balance-sheet captions, Title 17 as of October 22, 2026). AR turns into cash when customers pay, or it is reduced by write-offs when they do not.
What is accounts receivable?
In simple words, accounts receivable is the unpaid bill. The sale already happened. The cash has not arrived. The customer has a promise to pay, usually under stated terms such as net 30, which means payment is due 30 days after the invoice.
A simple net-30 example
A supplier delivers goods and sends an invoice due in 30 days. Until the customer pays, that unpaid invoice is accounts receivable. This is an illustration of the timing, not a real company's books. No dollar amount is shown, because the definition does not depend on one.
Is accounts receivable an asset?
Yes. It is a current asset, because the business expects to collect it in the operating cycle. On a registrant's balance sheet, trade receivables are stated separately from other receivables (17 CFR 210.5-02, Regulation S-X balance-sheet captions, Title 17 as of October 22, 2026).
Gross and net accounts receivable
Gross accounts receivable is the total unpaid balance. Net accounts receivable is that total minus the allowance for amounts the business does not expect to collect. The allowance is a separate estimate. See provision for credit losses.
Accounts receivable vs accounts payable
| Question | Accounts receivable | Accounts payable |
|---|---|---|
| Who owes the money? | Your customer owes you. | You owe your supplier. |
| Which statement line? | Asset. | Liability. |
| What clears it? | The customer pays you. | You pay the supplier. |
Accounts receivable is not revenue. Revenue is recorded when it is earned. AR is the unpaid part of a credit sale. A note receivable is different again: it is a written promise, such as a promissory note, rather than an ordinary open invoice.
AR journal entries
These are the standard forms of the entries. The amounts are labels for the debits and credits, not a real sale.
- Credit sale: debit accounts receivable, credit revenue.
- Customer payment: debit cash, credit accounts receivable.
- Write-off: remove the unpaid balance you no longer expect to collect. The allowance and direct methods are on the AR write-off journal entry page.
Accounts receivable increases with a debit and decreases with a credit. A credit balance in the AR account is a sign to investigate, not a normal result of a sale. It can mean a payment was applied twice, a credit memo was larger than the invoice, or cash arrived before the invoice existed.
Cash that arrives before anyone can match it to an invoice is not yet a reduction of a specific receivable. It sits aside until the match is made. The unpaid invoice stays in AR until that happens. Mixing the two makes both the balance and the collection measure wrong.
A note receivable is a written promise to pay, such as a promissory note. Ordinary accounts receivable is the open invoice from a credit sale. Both are amounts owed to the business. They are not the same line, and Regulation S-X asks registrants to keep trade receivables separate from other receivables (17 CFR 210.5-02, Regulation S-X balance-sheet captions, Title 17 as of October 22, 2026).
AR is also not cash and not revenue. Revenue records that the sale was earned. Cash records that the bank balance changed. AR records the gap between those two events. If you calculate the balance from revenue alone, you will miss collections, credits, and write-offs. The roll-forward is beginning AR, plus credit sales, minus collections, minus write-offs.
How to measure accounts receivable
Three common measures answer different questions. The formulas are accounting identities. This page does not cite a statistic for them.
- Turnover asks how many times the average balance was collected.
- Days sales outstanding asks how many days that collection takes.
- An aging report sorts the open invoices by how late they are.
A worked set of the ending-balance, average, and turnover formulas is on how to calculate accounts receivable. Average receivables for a ratio are discussed in calculating average receivables.
The AR process
- Agree the terms and send the invoice.
- Follow up before and after the due date.
- Apply the cash when it arrives. See cash application.
- If it stays unpaid, escalate to a collection agency or another path your policy allows.
Keep the words straight when you explain AR to someone who does not keep the books. The customer owes the business. The amount is an asset until it is collected or written off. The invoice date starts the terms. The due date is when the cash should arrive. None of those sentences requires a statute, and this page cites Regulation S-X only for the balance-sheet caption.
If the terms say net 30, day 30 is the due date, not the day you first ask. Asking early is a courtesy. Asking after day 30 is the follow-up the credit policy should already have scheduled. The receivable exists for the whole stretch, early or late.
More questions from operators are collected on accounts receivable questions. The topic hub is receivables and credit. The wider practice is accounts receivable management.
FAQ
Is accounts receivable an asset?
Yes. It is a current asset on the balance sheet. Registrants state trade receivables separately under Regulation S-X (17 CFR 210.5-02, Regulation S-X balance-sheet captions, Title 17 as of October 22, 2026).Is accounts receivable a debit or a credit?
AR increases with a debit and decreases with a credit.What is the difference between accounts receivable and accounts payable?
AR is money customers owe you. AP is money you owe suppliers.Is accounts receivable revenue?
No. Revenue is recorded when it is earned. AR is the unpaid balance from a credit sale.What is net accounts receivable?
Gross AR minus the allowance for amounts you do not expect to collect.Sources
- 17 CFR 210.5-02, Regulation S-X balance-sheet captions, Title 17 as of October 22, 2026 Accessed October 26, 2026.