What does accounts receivable refer to?

Accounts receivable specifically refers to the money that is owed to a business by its customers for goods and services that have already been delivered or used but have not yet been paid for. This represents a promise from customers to pay the company in the future, and it is classified as a current asset on the balance sheet.

When a business extends credit to customers, it records the amount due as accounts receivable, indicating an expectation of receiving payment in the future. This is crucial for managing cash flow because it reflects an amount the business can expect to convert into cash once the customers pay their outstanding invoices.

The other options do not accurately describe accounts receivable. For instance, the description of money that the business owes refers more to liabilities rather than receivables. Overdue bills are an issue related to payables, while instant cash flow solutions pertain to strategies that businesses use to manage liquidity rather than the definition of accounts receivable itself.