--- title: "What Is Accounts Receivable (AR)?" url: https://www.uncap.com/glossary/accounts-receivable author: "Denis Dyli" published: 2026-10-22 updated: 2026-10-22 summary: "Accounts receivable (AR) is the money customers owe a business for goods or services it provided on credit and has not yet been paid for. In B2B, an order sold on terms such as net 30 sits in accounts receivable until the buyer pays the invoice." --- # What Is Accounts Receivable (AR)? > Accounts receivable (AR) is the money customers owe a business for goods or services it provided on credit and has not yet been paid for. In B2B, an order sold on terms such as net 30 sits in accounts receivable until the buyer pays the invoice. **Accounts receivable**: Accounts receivable (AR) is the money customers owe a business for goods or services it provided on credit and has not yet been paid for. In B2B, an order sold on terms such as net 30 sits in accounts receivable until the buyer pays the invoice. ## How it works IRS Publication 334 says that goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. **The life of a receivable in a B2B sale** ### 1. Sale on credit, Receivable recorded Goods or services the customer has not yet paid for are shown in the seller's books as an account receivable. ### 2. Payment terms, Payment due The payment terms set how long the customer has to pay for the order, such as within 30 days on net 30. ### 3. Payment, Receivable settled When the customer pays, the amount is no longer owed and leaves accounts receivable. ### 4. Uncollectible, Bad debt If the seller can't collect part of the receivable, the uncollectible part is a business bad debt. How the sale shows up as income depends on your accounting method. Under an accrual method, you generally report income in the year it is earned. Under the cash method, you normally report income when you receive payment. The legal right behind a receivable has a name too. Under the Uniform Commercial Code (UCC 9-102), an "account" is a right to payment of a monetary obligation, including for property that has been or is to be sold. ## Accounts receivable vs. accounts payable The same invoice sits on both sides of a B2B sale: - Accounts receivable: money owed to your business by customers. For a distributor, it is what contractors and dealers owe on open invoices. - Accounts payable: money your business owes its own suppliers. The distributor's open bills from manufacturers are its accounts payable. A $5,000 invoice is a receivable for the seller and a payable for the buyer until it is paid. ## On the balance sheet For companies that file with the SEC, Regulation S-X lists accounts and notes receivable under current assets, when appropriate. It requires amounts receivable from customers (trade) to be stated separately from amounts due from related parties and others, and an allowance for doubtful accounts to be set forth separately. When a receivable cannot be collected, the IRS treats the uncollectible part as a business bad debt, and business bad debts are mainly the result of credit sales to customers. On the accrual method, you can deduct an uncollectible receivable if you included it in income. On the cash method, you cannot deduct amounts you never included in income. ## Example A building products distributor sells three orders on net 30 terms in one week: $8,400 to a roofer, $3,600 to a remodeler and $12,000 to a dealer. Its accounts receivable rise by $8,400 + $3,600 + $12,000 = $24,000. The roofer pays on day 25 and the dealer on day 30, so $20,400 turns into cash. The remodeler's $3,600 is still open on day 31, so it stays in accounts receivable as an overdue invoice and becomes the one to follow up. ## On Shopify Shopify B2B, on the Basic, Grow, Advanced and Shopify Plus plans, lets you sell on payment terms, so buyers pay after the order is placed: - Payment terms: net 7, net 15, net 30, net 45, net 60 or net 90, due on fulfillment, or a fixed date on draft orders. Net terms start from the day the order is placed. - Paying later: B2B buyers can log in to customer accounts, select an order and click Pay now any time up to the due date. After the terms expire they can still pay, but the order shows as Overdue. - Collecting: payments aren't automatically captured when the terms expire. If a buyer saved a card or bank account, you charge it from the Shopify admin, or automate a vaulted bank account debit with Shopify Flow. - Tracking: you can create an orders view that shows only orders that are Due, which displays orders that are overdue or due today. Shopify lists payment reminders among the B2B features on all four plans. ## How Uncap helps [Uncap Portal](/products/portal) puts NET terms, invoices, and payments in the portal, so buyers reorder, track, and pay from a portal built for their account. [Uncap Connect](/products/connect) syncs customer-specific pricing, credit terms, and tax rules between Shopify and the ERP, which stays the system of record. ## Related terms - Net 30 - Trade credit - Days sales outstanding - Credit memo - Order-to-cash - ACH payment ## Sources - IRS Publication 334: Tax Guide for Small Business (Bad Debts) - Cornell LII: 17 CFR ยง 210.5-02, Balance sheets - Shopify Help Center: Setting up payment terms in B2B ## Frequently asked questions ### What is accounts receivable vs payable? Accounts receivable is money customers owe your business; accounts payable is money your business owes its suppliers. One unpaid invoice is a receivable for the seller and a payable for the buyer. ### What is an example of an accounts receivable? A distributor ships $12,000 of product to a dealer on net 30 terms. Until the dealer pays, that $12,000 sits in the distributor's accounts receivable. ### Is accounts receivable a positive or negative? It is an asset. For companies that file with the SEC, Regulation S-X lists accounts receivable under current assets, when appropriate, with the allowance for doubtful accounts set forth separately.