What does Accounts Receivable (A/R) indicate?

Accounts Receivable (A/R) refers specifically to the amounts of money that are owed to a business by its customers for goods or services that have been delivered but not yet paid for. This figure is an important aspect of a company's balance sheet and serves as a key indicator of the company's revenue generation and cash flow.

When a business extends credit to its customers, that creates an expectation of future cash inflows, which is recorded as A/R. This asset reflects the business's legal right to collect payment in the future. Understanding A/R is essential as it informs management about the effectiveness of their credit policies and their customers' payment behaviors.

The other options refer to different financial aspects: future liabilities would relate to obligations the business has yet to fulfill, operational expenses pertain to ongoing costs necessary to run the business, and cash reserves indicate the amount of liquid assets available. However, none of these directly correlate to the concept of money owed to the business as represented by Accounts Receivable.