Differences Between Accounts Receivable and Accounts payable
Account receivable (classified as current assets) is the amount which the company owes from the customer for selling its goods or for providing the services. However, accounts payable (classified as current liabilities) is the amount owed by the company to its supplier when any goods are purchased or services are availed.
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.
Accounts Receivables vs Accounts Payable Infographics
- Accounts receivables are the expected cash to be received in the future for the sales that are 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 customers of the company owe to it. On the other hand, Accounts Payable is the amount that the company owes to the suppliers.
- Both of them 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 that is 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 leads to a decrease in cash flow.
- Accounts receivables are the result of credit sales, while accounts payable is 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 the discount given to the customers. The average Accounts receivables are calculated as beginning balance plus 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.
Video on Accounts Receivable vs. Accounts Payable
This article has been a guide to Accounts Receivables vs Accounts Payables. Here we discuss the differences between the two along with examples, infographics, and comparison table. You may also have a look at the following articles for gaining further knowledge in Accounting –