Accounts receivable (abbreviated A/R) is money owed to a business by another business or individual in exchange for property or services that were provided on credit. The settlement of an account receivable begins by sending an invoice to the customer. A company enters accounts receivable under current assets on its balance sheet. For example, a restaurant supply shop sells $10,000 worth of equipment to a restaurant on credit. As soon as the equipment is delivered to the restaurant the business records an account receivable on its books. Once the restaurant makes the full payment (in whatever time frame set out under the terms of the agreement) the accounts receivable is essentially replaced with cash. The case of United States v. Berg is an example of accounts receivables used in a legal setting.
[Last updated in June of 2022 by the Wex Definitions Team]