Receivables are an asset on your balance sheet. When you make a sale, your business either receives cash or extends credit to the customer. If your business extends credit to the customer, an income statement account increases and the asset account receivable (the amount the customer owes you) also increases. The receivables account, which is on the balance sheet, needs to be recorded to track the amount you are owed.
Assets are further broken out into current and long-term categories. Short-term receivables are generally due to be paid to you within a year and fall into current assets. Long-term receivables are for customers that have been extended credit for over a year.