Accounts receivable are the amounts of money owed to a business by another for goods or services it has provided but not yet received payment for. They are a legally enforceable claim to money for which the receiving company has agreed to provide payment within a specified amount of time.
In accounting practices, accounts receivable are generally shown as an asset on the firm’s balance sheet and other statutory reports. Accounts receivable are considered short-term or temporary assets because it is assumed that the company receives payment for these amounts within a specified amount of time, usually 90 or 120 days. Thus, amounts received for such accounts are reflected by debits to the firm’s cash account and corresponding decreases in the accounts receivable.