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An example of accounts receivable includes an electric company that bills its clients after the clients received the electricity. The electric company records an account receivable for unpaid invoices as it waits for its customers to pay their bills. Most companies operate by allowing a portion of their sales to be on credit.What is the purpose of accounts receivable?
Accounts Receivable (AR) is the equilibrium of money due to a firm for goods or services conveyed or utilized but not yet paid for by clients. Accounts receivable duties incorporate guaranteeing accuracy and efficiency of operations, processing and monitoring incoming payments, and securing revenue by confirming and posting receipts.How does accounts receivable affect a company's balance sheet?
Companies record accounts receivable as assets on their balance sheets because there is a legal obligation for the customer to pay the debt. They are considered a liquid asset, because they can be used as collateral to secure a loan to help meet short-term obligations.