Markets · 6 pages · 12 min

How accounts receivable are not cash

Accounts receivable are customers' unpaid invoices, a claim on future cash, not cash already in the bank.

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From the opening

Accounts receivable are amounts customers owe for goods or services the firm has already delivered and recorded as revenue. They are a claim that may become cash when the customer pays, and until that day they are not money the firm can hand to its own suppliers. The opening covers invoices owed by customers, revenue can precede payment, and allowance estimates nonpayment.

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Inside

Invoices owed by customers
Revenue can precede payment
Allowance estimates nonpayment
Collection is the conversion
Where the idea stops applying
A distinction worth keeping

Sources

Trade accounts receivable
Allowance for doubtful accounts

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How accounts receivable are not cash

From the opening

Inside

Sources

Also on the desk