What does accounts receivable represent for a business?

Accounts receivable represents the amounts a business is expected to receive from customers for goods sold or services provided on credit. This figure reflects sales that have already occurred but have not yet been paid for, indicating the company's anticipated cash inflow. It essentially captures the future revenue that the business will collect, which is critical for cash flow management and operational planning.

This answer highlights how accounts receivable directly ties into the company’s revenue cycle and financial health. Customer purchases on credit expand the business's immediate sales, even if the cash has not yet been received. Understanding this concept is vital for assessing a company’s liquidity and its ability to cover short-term obligations.