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Accounts Receivable vs Accounts Payable
What's the difference?
ACCOUNTS RECEIVABLE 💰
→ The amount of money customers owe the company.
Location: Current Asset on Balance Sheet
Offset: Allowance for doubtful account
Types: Trade Receivables, Notes Receivable
Cause: Created when the company sells goods or services on credit
Action: Money to be collected
Accountability: Lies with the debtors
ACCOUNTS PAYABLE 💳
→ The amount of money the company owes its suppliers.
Location: Current Liability on Balance Sheet
Offset: None
Types: Accrued Expenses, Interest Payable, Taxes Payable
Cause: Created when the company buys goods or services on credit
Action: Money to be paid
Accountability: Lies with the business
An easy way to remember the difference is to focus on the second word!
Accounts RECEIVABLE is the money you expect to RECEIVE in the future.
Accounts PAYABLE is the money you expect to PAY in the future.
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