---
title: "Accounts receivable"
description: "What accounts receivable are, how credit sales and collections are recorded, how to measure days sales outstanding, and how to manage overdue customer balances."
canonical: https://ledgeriano.com/glossary/accounts-receivable
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Accounts receivable

> What accounts receivable are, how credit sales and collections are recorded, how to measure days sales outstanding, and how to manage overdue customer balances.

Accounts receivable are amounts customers owe a business for goods or services already delivered on credit. They are current assets on the balance sheet and are tracked per customer so that each invoice can be collected, chased or written off. Receivables turn profit into cash only when customers actually pay.

A credit sale debits receivables and credits revenue (and output VAT where it applies); the customer's payment debits the bank and credits receivables. Tagging each line with the customer as a [party](https://ledgeriano.com/glossary/party) gives the balance per customer and an ageing report.

The main measure is days sales outstanding (DSO): how many days of sales are tied up in unpaid invoices. A DSO creeping up from 35 to 55 days can drain cash even while sales grow. The [cash conversion cycle calculator](https://ledgeriano.com/tools/cash-conversion-cycle-calculator) puts DSO in context with inventory and payables.

Review the ageing monthly, follow up overdue invoices early and record an allowance for doubtful debts (a [contra account](https://ledgeriano.com/glossary/contra-account)) for balances unlikely to be collected.

```
DSO = Trade receivables / Credit sales x Days in period
Receivables turnover = Credit sales / Average receivables
```

## Example: sale and collection

A 6,000 credit sale on 10 May is collected on 9 June.

| Date | Account | Debit | Credit |
| --- | --- | --- | --- |
| 10 May | Accounts receivable: Cedar Studio | 6,000 |  |
| 10 May | Sales revenue |  | 6,000 |
| 9 Jun | Bank | 6,000 |  |
| 9 Jun | Accounts receivable: Cedar Studio |  | 6,000 |

### Are accounts receivable an asset?

Yes, a current asset, because they are expected to be collected in cash within the normal operating cycle.

### What is a good DSO?

It depends on your payment terms. A DSO close to your standard terms (for example 30 days) is healthy; a DSO well above them means customers are paying late.