Is Accounts Receivable a Material Component of a Company’s Total Current Assets?

Written by True Tamplin, BSc, CEPF®

Updated on January 02, 2023

Yes, accounts receivable is a material component of a company’s total current assets. A current asset is any asset that will provide an economic benefit for or within one year. To be “material”means that it has a value significant enough to be worth noting for accounting purposes. Since accounts receivable will be converted into cash within one year and has a noteworthy value, it is a material current asset. Accounts receivable are funds that a company is owed by clients who have received a good or service, but have not yet paid. For these funds to be a current asset, they must be expected to be received within a year. An example of accounts receivable is Google Ads which allows businesses to incur an advertising bill and collect the funds after the ad placements have been used by the business. The outstanding funds waiting to be collected will be included in accounts receivable.

Is Accounts Receivable a Material Component of a Company’s Total Current Assets FAQs

Is accounts receivable a material component of the company's total current assets?

Yes, accounts receivable is a material component of a company’s total current assets.

What is a current asset?

A current asset is any asset that will provide an economic benefit for or within one year.

What does it mean for an asset to be material?

To be “material” means that it has a value significant enough to be worth noting for accounting purposes.

Why is accounts receivable a material current asset?

Since accounts receivable will be converted into cash within one year and has a noteworthy value, it is a material current asset.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.