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The term "Accounts Receivable" (AR) describes the unpaid balances that a business has not yet received from the customers for delivered goods or rendered services. Put another way, it stands for the sums that customers owe a company for credit sales. Since accounts receivable reflect the right to future cash inflows, it is recorded as an asset on a company's balance sheet. It is an essential component of working capital for a business because prompt collections are necessary to keep cash flow in check. Difference between Accounts Receivables and Trade Receivables Although the terms "trade receivables" and "accounts receivables" are frequently used synonymously, their definitions might vary slightly depending on the situation. Though precise use may differ, both generally relate to the sums that customers owe a company for credit sales. Accounts Receivables: Accounts Receivables refers to any sum of money due to a company, not just sums earned t...