What is ACCOUNTS RECEIVABLE?

Trade credit created by a company when it permits a client to pay in the future for goods or services that have already been delivered by the company. A client company is generally required to arrange payment within 7 to 180 days, though in some cases terms may extend even further. In exchange for granting the payment extension, the company implicitly or explicitly charges its customers a financing cost. Receivables granted in the normal course of business are routinely sold to third parties on a nonrecourse basis (FACTORING) or used as COLLATERAL to secure funding (FINANCING); in some cases they are repackaged and sold through a SECURITIZATION. See also ACCOUNTS PAYABLE.

More On This Topic



Link to This Definition
Did you find this definition of ACCOUNTS RECEIVABLE helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary