Account Receivable Law and Legal Definition
Account receivable means a debt owed by a debtor or customer to an enterprise for goods or services received. It usually represents money owed by customers in exchange for goods or services delivered to or used by them, but not yet paid for. Therefore, accounts receivable is an accounting transactions that deals with the billing of a customer for goods and services they have ordered. Income due from investments is not an account receivable. Account receivable is also known as a note receivable.
Most business entities execute accounts receivable by generating an invoice or by either mailing or electronically delivering it to the customer. A customer should pay the account receivable within the established time frame. For example, a company having account receivables means that it has made a sale but has yet to collect the money from the purchaser. Account receivables help to avoid the hassle of physically making payments upon each transaction.
In West Virginia Pulp & Paper Co. v. Karnes, 137 Va. 714 (Va. 1923), the court observed that an "Accounts receivable are contract obligations owing to a person on open account; "bills receivable" are all other contract obligations "owing to" a person”.