Accounts Receivable

Accounts Receivable are the credit sales of a buisiness that goods or services delivered but not yet paid for by customers. This is also recoreded as revenue in accounting. But when the company get paid later, it's recoreded in cash flow. In other words, real moeny doesn't come into the buisiness until accounts receivable is received. So it's important to analyze how much accounts receivable has been collected.

It is a type of bond. Accounts receivable have the potential to become uncollectible if the customer defaults.

For example, we're in the publishing business. We get an order from a wholesaler, and we ship a bunch of books to the wholesaler, and we don't get paid right away, so we create a receivable. We haven't received all of the money yet, but it's already recorded as revenue. Because of the nature of our industry, where there are often returns, not all of the accounts receivable we set up will turn into cash.