Definition of Accounts Receivable
Accounts receivable are the amounts that are yet to be received from the customers who have purchased the goods or services from the firm on credit. Accounts receivable are considered as assets of the firm as they will probably be received in the form of cash or cheque.
Accounts receivable appear as current assets in the balance sheet.
Example of Accounts Receivable:
A Firm makes baby carts and it sold 18000 units for say, $2 million to one of its customers on a 6-month credit period. That customer will be called Account receivable for the firm. In the balance sheet, the amount will appear under the current asset section along with other accounts to whom the firm has sold well on credit.