What type of account is Accounts Receivable classified as?

Accounts Receivable is classified as an asset because it represents money owed to a company by its customers for goods or services that have already been delivered or performed but not yet paid for. This account reflects a future economic benefit, as it indicates an expectation of cash inflow when the customers settle their debts.

In the balance sheet, assets are resources owned by a business that have the potential to provide future economic benefits. Accounts Receivable is particularly categorized as a current asset because it is typically expected to be collected within one year. This distinguishes it from liabilities, which are obligations that the company needs to settle, revenues, which represent the income earned from operations, and expenses, which are costs incurred during the business activities. Understanding the classification of Accounts Receivable as an asset is fundamental in accounting as it helps in assessing the company's liquidity and financial health.