Investor Glossary-accounts receivableInvestor Glossary-accounts receivableInvestor Glossary-accounts receivableInvestor Glossary-accounts receivableInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accounts Receivable

The HTML to link to this page
 

Accounts receivable are obligations due to the company from customers. Suppose a company sells a customer $50 in merchandise. The sales account increases by $50 and accounts receivable increases by $50. When the customer pays, cash increases $50 and accounts receivable decreases $50, reducing the accounts receivable for this obligation to $0. Since the company continually makes new sales, however, accounts receivable ordinarily has a positive balance. Accounts receivable are normally due within 90 days or less and are highly liquid. Indeed, in certain industries, accounts receivable are regularly sold or "factored" to receive immediate cash. Accounts receivable are therefore listed on the balance sheet as a current asset, below (completely liquid) cash and above (relatively less liquid) inventory. Accountants assume that the longer an account receivable is outstanding, the less likely it will be paid. Thus accounts receivable are regularly "aged" and written down to reflect the likely portion of accounts receivable that are uncollectible. Rising accounts receivable could mean customers are paying more slowly, but it can also indicate higher sales.



Rate this accounts receivable definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: quality assurance, minority interest, command economy, Zero Cost Collar, APR, annual return, Key Rate Duration, average price per share, ex-dividend date, phantom income, risk management, in escrow, EBITDA, diluted share, option premium, cancelled check, covered put, required rate of return, labor relations, VIX, balance sheet, current ratio, LIBOR, real GDP, 401a, debt service coverage, 1031 exchange, margin rate, 144a, liquidity ratio, class C shares, wholly-owned subsidiary, deferred tax, irrevocable trust, 1035 exchange, stock market close, deferred revenue, implied volatility, reverse mortgage, retained earnings, dividends payable, inflation, stock split, open position, limit order, ex-dividend, FICO score, FTSE, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use