Reading the accounts
Accounts receivable
Also called Debtors or Trade receivables
Money customers owe for goods or services already delivered.
How it works
Receivables represent revenue recognised but not yet collected. They are an asset, subject to the possibility that some customers never pay.
Rising days sales outstanding — receivables relative to revenue — can indicate looser credit terms being used to pull sales forward.
Where it misleads people
Receivables growing much faster than revenue is one of the most common markers in accounting-fraud cases, because it is what recognising revenue that will never be collected looks like.
Related terms
- Working capitalThe money tied up in day-to-day operations: inventory and money owed to you, less money you owe.
- Cash conversion cycleHow many days pass between paying for inventory and collecting cash from the customer.
- RevenueThe total value of goods and services a company sold in a period, before any costs.
- Accrual accountingRecording revenue and costs when they are earned or incurred, rather than when cash moves.
More in Reading the accounts
- Writedown
- Adjusted earnings
- Assets
- Tangible book value
- Audit opinion
- Share-based compensation
- Balance sheet
- Runway
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.