The Nutshell of Accounts Receivable

Accounts owed (accounts receivable) are short-term assets on a company's balance sheet, representing money customers owe for goods or services received on credit. These receivables are legally binding and must typically be paid within a set period, ranging from days to a year. Companies track accounts receivable using aging schedules to monitor payment status.
Accounts receivable are crucial for assessing a company's liquidity and financial health. They impact turnover ratios, which measure how efficiently a business collects payments. The accounts receivable turnover ratio and days sales outstanding help evaluate collection efficiency and cash flow stability.