What are Accounts Receivable?

• A. Accounts Receivable is a current asset representing the amount due from customers for payment of services or merchandise.
• B. A liability for future purchases.
• C. Marketable securities.
• D. Inventory.

Answer: (A)

Accounts receivable represents the amounts a business is owed by customers for goods or services that have been delivered but not yet paid. It is a current asset because it is expected to be converted to cash within the normal operating cycle, usually within a year. The balance rises when sales are made on credit and falls when customers pay, with possible adjustments for uncollectible amounts. This differs from a liability (such as obligations to suppliers for future purchases), marketable securities (investments that can be sold for cash), and inventory (goods held for sale).