Accounts Receivable: What It Is, How It Works, and Why It Matters
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Key terms
- Accounts ReceivableThe money that customers owe a business for goods or services that have been delivered but not yet paid for. Accounts receivable is recorded as an asset on the balance sheet because it represents future cash the company expects to collect. Managing accounts receivable efficiently is crucial for maintaining healthy cash flow, and businesses often track metrics like days sales outstanding to monitor how quickly they collect payments.
- Accounts PayableThe money a business owes to its suppliers, vendors, and creditors for goods or services received but not yet paid for. Accounts payable is recorded as a liability on the balance sheet and represents short-term obligations the company must fulfill. Effectively managing accounts payable helps businesses maintain good supplier relationships, take advantage of early payment discounts, and manage cash flow strategically.
- Room and BoardThe combined cost of housing and meal plans at a college or university, which is a significant portion of the overall cost of attendance. Room and board costs vary depending on whether you live on campus, off campus, or at home, and the type of meal plan you select. Many colleges require first-year students to live on campus and purchase a meal plan.
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