What is Accounts receivable (A/R)?

Accounts receivable, or A/R, is what your customers owe you. When you send an invoice with payment terms instead of collecting at the counter, the sale is recorded as revenue and the unpaid amount sits in A/R until the customer pays. Under accrual accounting the revenue counts when it is earned, not when the cash arrives, so A/R is the bridge between a sale on paper and money in the bank. It appears as a current asset on the balance sheet.

The A/R aging report is the main working tool. It groups open invoices into buckets such as current, 1 to 30 days, 31 to 60 days and over 90 days past due. The older an invoice gets, the less likely it is to be collected in full. Customer statements, reminder emails, finance charges on overdue balances and credit limits per customer are the standard ways to keep the older buckets small.

Not every receivable gets paid. When an invoice is clearly uncollectible, it is written off to bad debt expense. In Canada, if you already remitted GST/HST on that sale, you can generally recover the tax portion through a bad debt adjustment on a later return. Watching days sales outstanding (average A/R divided by daily credit sales) tells you whether customers are paying faster or slower over time.