accounts receivable vs accounts payable
1 Receivables usually only involve a single trade receivables account and a non-trade receivables account, while payables can be comprised of many more accounts, including trade payables, sales taxes payable, income taxes payable, and interest payable. Other differences between accounts receivable and payable are as follows: 1  Receivables are classified as a current asset, while payables are classified as a current liability. 2  Receivables may be offset by an allowance for doubtful accounts, while payables have no such offset. How a transaction is recorded in the General Ledger (GL) depends upon the nature of the transaction. Accounts Payable (AP) is recorded in the AP sub-ledger when an invoice is approved for transactions where the company must pay money to vendors for the purchase services or goods. On the other hand, Accounts Receivable (AR) records any money that a company is owed because of the sale of their goods or services. We're here to help! Even if you're new to accounting, you can probably guess the basic idea behind Accounts Receivable vs Accounts Payable based on their names. Accounts Receivable is money to be received by your business from a client or customer. Accounts Payable is money to be paid by your company for a product or service provided by a vendor. The difference between accounts receivable and accounts payable. Accounts receivable are the amounts owed to a company by its customers, while accounts payable are the amounts that a company owes to its suppliers. What is Accounts Payable? If Accounts Receivable is all about money in the door, Accounts Payable is the other side of that coin: it's the money your business owes for overhead expenses like rent, phone and electric bills, insurance, and the other supplies and services you need to keep your business running. The amounts of accounts receivable and payable are routinely compared as part of a liquidity analysis, to see if there are enough funds coming in from receivables to pay for the outstanding payables. This comparison is most commonly made with the current ratio, though the quick ratio may also be used. Accounts payable are amounts a company owes because it purchased goods or services on credit from a supplier or vendor. Accounts receivable are amounts a company has a right to collect because it sold goods or services on credit to a customer. Recorded as. Liability (payable always a liability). And just like Accounts Receivable represents a pending inflow of cash, you can think of Accounts Payable as a pending cash outflow: for now, you still have the cash in hand, but you owe a debt to the vendor/supplier at the end of the set payment term. 1 Accounts Payable (A/P) is recorded as a liability, while Accounts Receivable (A/R) is considered an asset. 2  Accounts Payable (A/P) will decrease the company’s cash while the opposite will happen with Accounts Receivable (A/R).
1. Receivables are classified as a current asset, while payables are classified as a current liability. 2. Receivables may be off set by an allowance for doubtful accounts, while payables have no such offset. 3. Accounts receivable are the amounts owed to a company by its customers, while accounts payable are the amounts that a company owes to its suppliers. 4. Accounts Payable (A/P) is recorded as a liability, while Accounts Receivable (A/R) is considered an asset. 5. Accounts Payable (A/P) will decrease the company’s cash while the opposite will happen with Accounts Receivable (A/R).