Difference between accounts payable and accounts receivable
accounts payable and accounts receivable:
While both these terms duly play their part in the business arena, these two terms are different from each other, just like the terms themselves indicate. However they both relate to the accounts section which forms a connection between the two.
What is accounts payable?
The term accounts payable refers to the whatever costs that the company or a certain individual has to pay. It is stated as a liability or a debt in the financial reports and once paid, it causes a loss. The accounts payable tracks the bills or the amount that the company owes to certain vendors for the goods and supplies that it purchased on credit and pays them accordingly. Once paid, the book keeper is required to transfer the amount from liabilities to the expenses incurred column. The accounts payable are not immediately paid.
What is accounts receivable?
The term accounts receivable refers to whatever the amounts that the company is yet to receive for the goods or the services that it had sold. This could be the amounts that are to be collected from people who have acquired goods or the services of the company on credit. Accounts receivable are considered as assets and like accounts payable, accounts receivable are to be realized in the future as well.
What is the difference between accounts receivable and accounts payable?
While both the terms relate to accounts and the payment or the receiving of payments, accounts payable are considered as debts and stated as liabilities on the financial statements of the company whereas accounts receivable are considered as assets and sated as an asset in the company financial statements.
Also, both accounts are not immediately realized as they are both either to be paid or received in the future.
While the purpose of the accounts payable is to keep track of the amounts to be paid which is useful in being able to pay the debts in time, the purpose of the accounts receivable is to keep track of the amounts that are due from the creditors so that the company may not suffer a loss. Therefore, both accounts can be regarded as of extreme importance to the machinery of a company.
While both accounts payable and accounts receivable are developed according to industry policies, standards and financial condition, the process of accounts receivable have proven to be much more of a complex process than that of accounts payable which does not often have specific, strict procedures.