account receivable

noun
plural accounts receivable

Definition of account receivable

: a balance due from a debtor on a current account

Examples of account receivable in a Sentence

Recent Examples on the Web

Inspire South, for instance, had $4 million in accounts receivable from five other Inspire schools and the Inspire District Office in 2017-2018, according to its audit report. San Diego Union-Tribune, "Inspire charter schools spread across California as critics warn of performance, financial concerns," 11 Aug. 2019 When a company's accounts receivable are growing faster than sales, that indicates possible channel stuffing. Dallas News, "Motley Fool: Is Wall Street wrong about iRobot, stocks for all ages and this week's trivia," 30 June 2019 That would let People’s take steps to protect its collateral on WMG’s multimillion-dollar debt, in the form of machinery, equipment and inventory at the company’s Suffield headquarters, along with business records and accounts receivable. Jon Lender, courant.com, "Jon Lender: State-subsidized firm bounces 97 checks — as it’s supposed to be recovering from bankruptcy," 27 June 2019 The hospital should actually have 2018 dollars available or in their accounts receivable to pay off the $500 million. Juan Perez Jr., chicagotribune.com, "County health officials say IG report was ‘simply wrong’ even as commissioners plan hearings on system’s finances," 27 June 2019 Novo Nordisk’s finance function, which currently employs about 1,000 people, also might shed some jobs as part of a move to automate tasks including cash management and accounts receivable, Mr. Knudsen said. Nina Trentmann, WSJ, "Danish Insulin Maker Novo Nordisk Cuts Jobs, Shifts R&D Spending," 1 Nov. 2018 The airline has booked the compensation in accounts receivable but hasn’t yet got the cash. Jon Sindreu, WSJ, "Norwegian Air May Survive After All," 12 Nov. 2018 Huarong and China Cinda, another listed AMC, have in recent years been highly active in buying up companies’ accounts receivables, according to researchers at MacroPolo, part of the Paulson Institute think tank. Andrew Peaple, WSJ, "China’s Bank Saviors Turn Problem Child," 23 Oct. 2018 Outside leadership changes, the utility has also struggled to turn over critical data to its independent auditor, such as accounts receivables from water bills. Beau Evans, NOLA.com, "Sewerage & Water Board poised to seek risky audit extension," 5 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'account receivable.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of account receivable

1812, in the meaning defined above

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Last Updated

12 Sep 2019

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The first known use of account receivable was in 1812

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More Definitions for account receivable

account receivable

noun

Financial Definition of account receivable

What It Is

Accounts receivable (A/R) are amounts owed by customers for goods and services a company allowed the customer to purchase on credit.

How It Works

Let's assume that Company XYZ sells $1 million of widget parts to a widget manufacturer and gives that customer 60 days to pay for those parts. Once Company XYZ receives the order and/or sends the parts and/or sends the customer an invoice, it will decrease its inventory account by $1 million and increase its accounts receivable by $1 million. When 60 days has passed and Company XYZ is paid, it will increase cash by $1 million and reduce its accounts receivable by $1 million.

A/R is an asset, and as such, it appears on the balance sheet. In particular, A/R is a current asset, meaning that the amount owed is expected to be received within the next 12 months.

When accounts receivable go down, this is considered a source of cash on the company's cash flow statement, and as such, it increases the company's working capital (defined as current assets minus current liabilities). When accounts receivable goes up, this is considered a use of cash on the company's cash flow statement because the company is "stretching out" the time it takes to receive money owed to it and thus is using cash more quickly.

Why It Matters

Accounts receivable is an important factor in a company's working capital. If it's too high, the company may be lax in collecting what's owed too it and may soon be struggling to find the cash to pay the bills; if it's too low, the company may be unwisely harming customer relationships or not offering competitive payment terms. In general, accounts receivable leciels correspond to changes in sales levels.

Companies can sometimes use their receivables as collateral for borrowing money. The level of accounts receivable also affects several important financial-performance measures, including working capital, days payable, the current ratio and others.

It is important to note that uncollectible receivables do not qualify as assets (these uncollectible amounts are reclassified to the allowance for doubtful accounts, which is essentially a reduction in receivables); thus, companies usually allow only creditworthy customers to pay days, weeks or even months after they've received the company's services or goods. Sometimes companies sell their receivables for cents on the dollar to other companies that focus solely on collecting the owed amounts.

Source: Investing Answers

account receivable

noun
account re·​ceiv·​able | \ -ri-ˈsē-və-bəl\
plural accounts receivable

Legal Definition of account receivable

: a balance due from a debtor on a current account

More from Merriam-Webster on account receivable

Britannica.com: Encyclopedia article about account receivable

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