Every unpaid invoice you have issued is an account receivable: revenue you have earned but not yet collected. On a balance sheet, AR sits as a current asset, because it is money with a contractual claim behind it and a due date attached.
AR is created the moment an invoice is issued and cleared the moment payment lands. Its opposite number is accounts payable — the same amounts as seen from the customer’s books.
Why It Matters
AR is where profitable businesses run out of cash. Revenue on paper does not make payroll; collected cash does. The gap between the two is measured by how large AR has grown and how old it is — which is why an AR aging view (30/60/90 days overdue) is one of the first reports any accountant asks for. Managing AR means shortening the distance between earning money and holding it.
Example
A studio issues three invoices in July: $2,000 (paid), $3,500 (due in August), $1,500 (now 40 days overdue). Its accounts receivable is $5,000 — and the aging view says $1,500 of it needs a chase email today, not another month of hoping.
Frequently Asked Questions
Is accounts receivable an asset?
Yes — a current asset, since it represents amounts contractually owed and normally collectable within a year. It is not cash, though, which is why fast-growing AR can coexist with an empty bank account.