Accounts Receivable belongs to which category in accounting?

Accounts Receivable is classified as an asset in accounting. This is because it represents money that is owed to a company by its customers for goods or services that have been delivered or used but not yet paid for. When a business makes a sale on credit, it recognizes the sale and accounts for the amount expected to be received in the future as an asset.

In the balance sheet, assets are resources owned by a company that have economic value and can provide future benefits. Accounts Receivable is categorized under current assets, as it is expected that these amounts will be collected within a year. By tracking Accounts Receivable, a business can assess its cash flow and financial health, making it a vital part of managing finances.

In contrast, liabilities represent obligations the business owes to outsiders, Owner's Equity reflects the owners' stake in the company, and revenue represents the income generated from normal business operations. Each of these categories plays a different role in the financial statements, but Accounts Receivable specifically falls under the asset category due to its nature of representing future cash inflows.