What type of account is Accounts Receivable classified as?

Accounts Receivable is classified as an asset because it represents money owed to a business by its customers for goods or services that have been provided but not yet paid for. This classification falls under current assets on the balance sheet, as it is expected that these amounts will be collected within a year or during the normal operating cycle of the business.

Assets are resources that have economic value and can be converted to cash, which is precisely what Accounts Receivable entails. When a business sells on credit, it expects to receive payment in the future, and until that payment is received, the amount owed is recorded as an asset.

In summary, Accounts Receivable is included in the asset category because it reflects value and the potential for cash inflow, distinguishing it from liabilities, equity, or revenue, which represent different financial elements of a business's accounting framework.