Accounts receivable meaning

In legal practice, accounts receivable are the monetary amounts a business or individual is entitled to be paid by customers for goods or services already supplied on credit. They are commonly referred to as trade debts or book debts. The term is generally descriptive rather than a term of art, though in England and Wales and Northern Ireland “receivable” is defined for the limited purposes of the Business Contract Terms (Assignment of Receivables) Regulations 2018, which limit bans on assigning receivables in certain business contracts. In Scotland, the Moveable Transactions (Scotland) Act 2023 modernises assignation and security over “claims” (which include receivables). In Ireland, usage is consistent and governed by contract and general assignment law. Key features and usage: - Arises under invoices or accrued contractual rights to payment once earned. - Commonly sold or financed through factoring or invoice discounting. - Frequently subject to assignment of receivables and security over book debts, including fixed or floating charges (priority and perfection rules are jurisdiction-specific). - Material in insolvency, including set-off, restrictions on assignment, proceeds, and trust issues. Receivables typically exclude loans or non-trade claims unless expressly included. Their characterisation and transferability are central to cash flow management, secured lending and enforcement strategy.