What is Accounts Receivable?
Accounts receivable refers to the amount of money that a business is owed by its customers for goods or services that have been delivered but not yet paid for. This asset is recorded on a company's balance sheet, and is a crucial component of working capital. For example, if a company sells a product to a customer for $1,000 and gives the customer 30 days to pay, the $1,000 is recorded as an accounts receivable until the customer pays. Effective management of accounts receivable is important for a company's cash flow and overall financial health. This involves monitoring aging accounts, following up with customers on outstanding balances, and establishing credit policies to minimize the risk of bad debt.
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