Final answer:
An accounts receivable arises when goods or services are provided on credit, meaning payment will be received in the future. It is recorded as an asset on the balance sheet, either when goods are sold on credit or services are provided on credit.
Step-by-step explanation:
An accounts receivable results from a transaction where goods or services are provided on credit. This implies that the payment for the goods or services will be made at a future date. When businesses sell goods on credit, this results in an accounts receivable on the balance sheet, which is essentially an asset representing a legal obligation for the customer to pay for the purchased goods or services. Similarly, providing services on credit also leads to the recording of an accounts receivable for the service provider.
Credit transactions indicate a level of trust between the seller and the buyer, where the seller trusts that the buyer will fulfill their payment obligations in due time. Therefore, both selling goods and providing services on credit involve the creation of accounts receivable. However, transactions involving immediate payment with cash or credit card do not result in accounts receivables as they are settled instantly.