Account Receivable someone, provide, example, account, increase

Elliotbay

Help please.
How can an increase in the account receivable be considered a use of cash?
Could someone explain or provide an example.

Thanks in advance.



Edited 1 time(s). Last edit at Tuesday, November 23, 2010 at 04:38PM by hhCFA.

ramdabom

Account receivable implies the company already paid cash for the inventory it sold, but hasn't received cash for it from the customer. Its a use of company's cash - effectively it has given a loan to the customer.

Bulla564

Thanks ravinsu.

So an increase in the account receivable indicates a sale on credit