Accounts receivable is an asset account that represents money that is owed to a business by its customers for goods or services that have been delivered but not yet paid for.
An example of accounts receivable might be a customer who buys goods on credit and has not yet paid the business for those goods. The business would record the amount owed by the customer in the accounts receivable account until the customer makes payment.
Suppose a customer walks into a store and buys a widget for $100. The store doesn't require the customer to pay for the widget upfront, so the customer takes the widget and promises to pay the store at a later date.
In this case, the store would record the $100 owed by the customer in the accounts receivable account. The store would continue to show the $100 in accounts receivable until the customer pays for the widget. Once the customer makes payment, the store would reduce the accounts receivable amount by $100 and record the payment as revenue.
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