Legal Definitions - A/R

A/R is an abbreviation for accounts receivable.

Accounts receivable refers to the money that a business is owed by its customers for goods or services that have already been delivered or provided, but for which payment has not yet been received. It represents a short-term asset on a company's balance sheet, as it is expected to be collected within a relatively short period, typically 30, 60, or 90 days. Essentially, it's a record of all outstanding invoices that customers need to pay.

• Example 1: A Freelance Web Developer

  A freelance web developer completes a new website for a small local bakery. After the website is launched and approved, the developer sends an invoice to the bakery for $3,000, with payment due in 30 days. Until the bakery pays this invoice, the $3,000 represents accounts receivable for the web developer's business. It's money the developer has earned and is owed, but has not yet collected.

• Example 2: A Wholesale Food Distributor

  A large food distribution company delivers a truckload of fresh produce to a chain of grocery stores. The total value of the produce is $15,000, and the grocery stores have agreed to pay the distributor within 45 days. From the moment the produce is delivered and the invoice is issued until the payment is received, that $15,000 is recorded as accounts receivable on the food distributor's financial records. It's a claim the distributor has on future cash from the grocery stores.

• Example 3: A Veterinary Clinic

  A veterinary clinic performs a complex surgery on a pet. The pet owner's insurance company covers a significant portion of the cost, and the clinic bills the insurance company directly for $2,500. While the clinic waits for the insurance company to process and send the payment, that $2,500 is considered accounts receivable for the clinic. It's a service already rendered, and the payment is expected from a third party (the insurance company) in the near future.