Accounts receivable (AR) is considered a current asset on a company's balance sheet. It represents the money that is owed to the company by its customers for goods or services that have been delivered or performed but not yet paid for.
Recognizing the difference between accounts receivable as an asset versus revenue is essential. Although it counts as an asset, it is only potential revenue until it is actually collected. Additionally, while accounts receivable is an asset, it is not without risks. The possibility of non-payment or bad debts must be considered, which can affect a company's financial forecast and valuation.