Accounts Receivable (AR)
Definition
Accounts receivable is money owed to the company by customers for goods or services already delivered but not yet paid for — revenue has been recognized, cash has not arrived. It is a current asset and a core component of working capital.
An increase in AR consumes cash (sales made but not collected), so rising AR is subtracted in cash flow from operations. Companies reserve for expected uncollectible amounts via an allowance for doubtful accounts (a contra-asset).
Analysts monitor AR through days sales outstanding (DSO); AR growing much faster than revenue can signal channel stuffing, deteriorating customer credit, or loosened payment terms.
Why interviewers ask
AR appears in accrual walk-throughs ("you sell $100 on credit — walk through the statements": revenue and pre-tax income up $100, no cash yet, AR up on the balance sheet) and in working-capital sign-convention questions. The trap is forgetting that collecting AR later is a cash inflow with no income statement impact.
Related terms
Interviews don't test definitions — they test recall under pressure.
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