Accounts receivable must satisfy the following criteria: the customer owes money and has yet to pay, the amount is due in less than a company’s operating cycle, and the account usually does not incur interest When a customer pays for a product or service on a line of credit, the Accounts Receivable account is used.

When a customer purchases a product or service on credit, using an in-house account, Accounts Receivable increases and Sales Revenue increases. When the customer pays the amount due, Accounts Receivable decreases and Cash increases

receivable — outstanding amount owed from a customer. matching principle — (also, expense recognition principle) records expenses related to revenue generation in the period in which they are incurred. revenue recognition principle — principle stating that company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided. interest — monetary incentive to the lender, which justifies loan risk; interest is paid to the lender by the borrower.