Accounts receivable are any assets that are owed to another company. Receivables can be found on a company’s balance sheet and the time it takes to cover the amount owed on these receivables varies. If company B sends a product to company A and is waiting for company A to send them cash, company B’s accounts receivables have increased because its cash has not be sent.
Let’s imagine that the Atlanta Hawks decided that they wanted to launch a new sweatshirt because of their recent success. It’s the 2015 NBA season and right now the Hawks are winning games in impressive fashion. In order to help distribute the new product, the franchise decided that they wanted to sell the sweat shirts to a local distributor. The Hawks sent a number of the sweat shirts to the distributor’s warehouse and now the franchise is waiting for their money in return. At this point in time, the Hawks have an increase in their accounts receivable because the distributor needs time to make money selling the sweat shirts before they can complete the transaction.