What Is Accounts Receivable?
Accounts receivable is where you record any money owed to you by others that they have not yet paid. In other words, you use it to record goods or services you are invoicing that you do not expect to receive immediate payment for.
Accounts receivable should be used to record the following:
- Money owed to you from debtors
- Money you have sent a bill or invoice for
- Money that must be paid to you so your debtor does not default on their bill, invoice or other debt
Accounts receivable is used for goods or services you supply “on credit” that creates a creditor-debtor relationship between your business and your customer. That relationship lasts until they make payment.
Accounts receivable is not typically used for:
- Internal business accruals like tax rebates or interest received
- Revenue and payments that you receive straightaway, like selling retail goods direct to customers (these are just part of your normal business sales recording)