Difference between Accounts Receivable and Accounts Payable
Basis |
Accounts Receivable |
Accounts Payable |
---|---|---|
Meaning |
Accounts Receivable represents the amount of money owed to a company by its customers for goods or services provided on credit. |
Accounts Payable represents the amount of money a company owes to its suppliers or vendors for goods or services purchased on credit. |
Nature of Account |
It is an Asset Account. |
It is a Liability Account. |
Transaction Initiation |
It occurs when goods/services are sold on credit to customers. |
It occurs when goods/services are purchased on credit from suppliers. |
Recording |
Accounts Receivable is recorded on the balance sheet under current asset. |
Accounts Payable is recorded on the balance sheet under current liability. |
Impact on Cash Flow |
It represents future cash inflows for the business. |
It represents future cash outflows for the business. |
Accountability |
Accountability lies on the debtors. |
Accountability lies on the business. |
Relationship Management |
Crucial for maintaining positive relationships with customers and ensuring timely payments. |
Crucial for fostering good rapport with suppliers and avoiding strained relationships due to late payments. |
Difference between Accounts Receivable and Accounts Payable
Accounts Receivable (AR) and Accounts Payable (AP) are two fundamental aspects of a company’s financial operations, often found on its balance sheet. Accounts Receivable represents the amount of money owed to a company by its customers for goods or services provided on credit. Accounts Payable represents the amount of money a company owes to its suppliers or vendors for goods or services purchased on credit.
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