Accounts receivable (A/R) are funds that are owed to a company by its customers. This amount is typically recorded on the company’s balance sheet as an asset. In order to keep track of accounts receivable, companies will typically set up an accounts receivable ledger. This ledger will contain all of the pertinent information regarding each customer’s outstanding balance.
Companies typically send out invoices to their customers on a monthly basis. These invoices will list all of the products or services that the customer has purchased from the company, as well as the corresponding amount owed. Once the customer pays the invoice in full, the company will record the payment on the ledger and the account will be considered settled.