Accounts receivable
The money your customers owe you for goods or services already delivered but not yet paid — an asset on your balance sheet until the cash arrives.
What accounts receivable means.
Accounts receivable (AR) is the money customers owe your business for goods or services already delivered or invoiced but not yet paid, carried as a current asset on the balance sheet until the cash arrives. The SEC’s small-business office defines it the same way in its balance-sheet primer, released September 2024: “Accounts receivable are the amounts that customers owe the entity for their purchases of its goods or services on credit.”
On accrual-basis books the invoice creates the receivable and the customer’s payment clears it. AR is tracked per customer and per invoice, and grouped by how overdue it is in an “aging” report: current, 1–30, 31–60, 61–90 and over 90 days.
AR aging is a cash-flow early-warning.
A growing or aging receivables balance is one of the earliest signals of a cash problem: the business is profitable on paper, but the money is sitting in unpaid invoices. The aging report tells you which customers are slow and how much cash is tied up.
That report is only as good as the bookkeeping under it. If payments are not applied to the invoices they pay, the aging overstates what customers owe, and collection calls go to people who have already paid.
Accounts receivable in a QuickBooks file: a worked example.
Illustrative figures, not a client file.
- 01
The invoice creates the receivable
Take a services business that invoices a customer $6,000 on June 3, on net-15 terms. QuickBooks posts a debit to Accounts Receivable and a credit to Service Income, so June revenue and the asset both rise by $6,000.
- 02
The payment clears part of it
On June 28 the customer pays $4,000, recorded with Receive payment against that invoice. Accounts Receivable falls by $4,000 and the cash goes to the bank, or to Undeposited Funds until it is deposited. Income does not move, because it was recorded when the invoice was raised.
- 03
What the reports show at June 30
The A/R Aging Summary shows $2,000 open for that customer in the 1–30 days column (the invoice was due June 18), and the balance sheet carries the same $2,000 inside Accounts Receivable. Agreement between the two is the first test, not the last: the next section shows how both can agree and still be wrong.
How accounts receivable goes wrong in QuickBooks.
Payments deposited as income
If the $4,000 is entered as a bank deposit coded to Service Income instead of received against the invoice, revenue is counted twice, the invoice still shows $6,000 open, and the customer looks $4,000 behind on a bill they have paid. The aging and the balance sheet still agree, which is why this error survives month after month.
Journal entries posted straight to Accounts Receivable
A journal entry to A/R moves the account without clearing any invoice. It sits on the customer’s balance as a stray open item, so the total can look plausible while no invoice underneath it is right. The repair is to re-post the item through the invoice and payment workflow, not another journal entry.
Balances nobody has decided about
Invoices that passed 90 days and stopped moving are a collection decision that was never made. Either someone chases them, or they are written off; carrying them inflates the balance sheet. See write-off.
Receivables kept true
Applying payments, clearing stray items and keeping the aging true every month is TechBrot’s accounts receivable management; a file where the aging has never agreed with the balance sheet starts with a cleanup. Bad-debt deductions and anything else on a tax return are your CPA’s or EA’s call.
How accounts receivable works.
AR lives in two places at once: the aging report, built from open invoices customer by customer, and the single Accounts Receivable account on the balance sheet. Run both as of the same date on the accrual basis and the totals should agree to the penny. On a cash basis AR should be zero, and a non-zero balance is itself the finding.
Accounts receivable vs. accounts payable.
They are mirror images. Accounts receivable is money owed to you (an asset). Accounts payable is money you owe others (a liability). One customer’s receivable is its vendor’s payable.
Accounts receivable questions.
Why doesn’t my AR aging match the balance sheet?
When the totals disagree, the reasons are usually mechanical: the two reports run on different dates or on different bases (an aging aged to today, compared with a balance sheet at month end, is the classic version), or transactions damaged or misdated in a migration. When the totals agree but the customer detail is wrong, look for journal entries posted to Accounts Receivable instead of invoices, payments deposited as income instead of received against the invoice, and customer prepayments or credits left unapplied. The repair is at transaction level, as the next answer explains.
Can I fix an AR mismatch with a journal entry?
Almost never, and it is the fix that creates next quarter’s problem. A journal entry moves the control account without clearing the invoice you actually needed to clear, so the total can be made to look right while the customer detail underneath stays wrong. The repair is transaction-level: find what was posted outside the invoice workflow and re-post it through the workflow.
Should accounts receivable ever be negative?
A negative total usually means unapplied payments or credit memos exceeding open invoices — often customer prepayments taken before the invoice existed. It is not wrong to hold a customer deposit; it is wrong to hold it in A/R. It belongs in a liability account until the work is delivered and the invoice raised.
What does an AR balance that never moves mean?
Invoices that have aged past 90 days and stopped changing are, in practice, a collection decision that has not been made. They inflate the asset side of the balance sheet and overstate what the business is worth. Either they are collectible and someone needs to chase them, or they are not and they need writing off — see write-off.
Does AR exist on cash-basis books?
It should not. On a cash basis revenue is recorded when the money arrives, so there is nothing to be owed. A cash-basis balance sheet showing a non-zero Accounts Receivable is a reporting-basis problem, not a collection one — usually a file switched between bases, or a report run on the wrong basis.
How far back does an AR clean-up have to go?
To the last close where the aging report and the balance sheet genuinely agreed. That is the anchor, and finding it is the first step — there is no point correcting this quarter on top of a difference that started two years ago. If they have never agreed, the anchor becomes the opening balance and the work is a cleanup rather than a correction.
Is your AR aging report trustworthy?
A QuickBooks ProAdvisor checks whether payments are matched to invoices and what’s really collectible — with a written fixed-fee scope to clean it up.
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