What is Accounts Receivable ("AR")? Why This Question Matters? What happens when AR goes up? What happens when it goes down?
By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers"
Here's an outline of what we cover in this free tutorial:

1. Why This Question Matters

This one is both a "real world" scenario, AND a very common
question in interviews.

2. What is Accounts Receivable ("AR")?

Line item on Balance Sheet for cash that you still need to
collect from customers.

Recorded it as revenue, but haven't received the cash payment
from them yet (Like an "IOU").

Sent invoice and delivered product, but still waiting on payment
from customer.

(Standards differ a bit by company and industry, but that's the
basic idea)

3. What happens when AR goes up - record revenue and profit, but no cash received yet... so cash goes down!

Intuition: Recorded paper profit that you haven't actually gotten
in cash yet...

But those taxes you pay on that profit ARE in cash!

So you're paying extra taxes for profit you don't have yet, which reduces your cash.

4. What happens when AR then goes down after you've collected the cash - no changes on IS, but cash now INCREASES to reflect the collection, AR decreases, and other side balances via Retained Earnings.

Intuition: AR "going down" means a cash collection has taken
place... but the revenue, profits, and taxes you've recorded don't change.

So all you do is REMOVE the cash decrease on the CFS...

And cash on the Balance Sheet is now up, with Retained Earnings up on the other side to balance it.

5. Summary & Intuition Behind Each Step.

Click the link below and go to "Files & Resources" to get this Excel file for yourself.
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