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Accounts Receivable vs Accounts Payable

Updated on January 3, 2024
Article bySayantan Mukhopadhyay
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Differences Between Accounts Receivable and Accounts payable

Account receivable (classified as current assets) is the amount the company owes from the customer for selling its goods or providing services. However, accounts payable (classified as current liabilities) is the amount the company owes to its supplier when any goods are purchased or services are available.

Accounts-Receivable-vs-Accounts-Payable

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Comparative Table

BasisAccounts ReceivableAccounts Payable
MeaningAccounts Receivable is the amount that the customers of the company owe to it.Accounts Payable is the amount that the company owes to its suppliers.
Position on the Balance sheetAccounts Receivable is on the current asset of the balance sheetCurrent Asset Of The Balance SheetCurrent assets refer to those short-term assets which can be efficiently utilized for business operations, sold for immediate cash or liquidated within a year. It comprises inventory, cash, cash equivalents, marketable securities, accounts receivable, etc.read more.Accounts Payable is on the current liability of the balance sheetCurrent Liability Of The Balance SheetCurrent Liabilities are the payables which are likely to settled within twelve months of reporting. They're usually salaries payable, expense payable, short term loans etc.read more.
OffsetReceivables can be offset with the allowance of doubtful debts.Payables have no offset.
Type of accountsReceivables have only one category of account, i.e., trade receivablesTrade ReceivablesTrade receivable is the amount owed to the business or company by its customers. It is also known as account receivables and is represented as current liabilities in balance sheet.read more.Payables have multiple categories of accounts like sales payable, interest payableInterest PayableInterest Payable is the amount of expense that has been incurred but not yet paid. It is a liability that appears on the company's balance sheet.read more, income taxes payable.
CauseThis account is created because of the selling of goods and services.This account is created because of purchasing material on credit.
Impact on cash flowCash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read moreResults in Cash inflowResults in Cash outflow
ActionMoney to be collectedMoney to be paid
AccountabilityAccountability lies on the debtors.Accountability lies in the business.
TypesBills receivables and debtorsBills payable and creditors

Both of these are important for business because they both help a business know how much the business needs to pay off and how much the business would receive.

In this article, we will go through a comparative analysis between them.

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Accounts Receivables vs Accounts Payable Infographics

Accounts-Receivables-vs-Accounts-Payable

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Key Differences

  • Accounts receivables are the expected cash to be received in the future for the sales made on a credit basis. Accounts payable is the cash that is to be paid to the creditors for the purchase of raw material or services
  • Accounts Receivable is the amount that the company’s customers owe to it. On the other hand, Accounts Payable is the amount that the company owes to the suppliers.
  • Both are a part of the balance sheet, but accounts receivable falls under the current assets section while accounts payable falls under the liabilities section under current liabilities.
  • Accounts receivables are the amount owed to the company, while accounts payable is the amount owed by the company.
  • Accounts receivables are created because of the selling of goods and services, while accounts payables are created because of purchasing material on credit.
  • Receivables can be offset with an allowance of doubtful debts, while payables have no offset.
  • In the case of Accounts receivables Money to be collected, while in the case of Accounts, payables money is to be paid.
  • Accounts receivables lead to an increase in cash flow, while accounts payable lead to a decrease in cash flow.
  • Accounts receivables result from credit sales, while accounts payable are the result of credit purchases.
  • Components of Accounts receivables are debtors and bills receivables, while a component of accounts payable is billed payable.
  • Accounts receivables are calculated as total sales minus returns, and all the allowances and discounts are given to the customers. The average Accounts receivables are calculated as the beginning balance plus the ending balance divided by two. Accounts payable is simply the total cost of purchases.
  • For Accounts receivables, the accountability lies on the debtors, while for account payables, the accountability lies on the business.

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