blog details
  • 17 Jan 2022

Major difference between Accounts payable and accounts receivables

Cash flow is one of the important aspects of accounting that shows the amount of money spent and the amount of money received. The term accounts payable and accounts receivable is very important for any business. These are basically the expenditures and revenue of the business. It is important to keep both in proper equilibrium to ensure that the financial condition of the business is in good health. Certainly, there is some dissimilarity between accounts payable and accounts receivables. An accounts payable and receivable clerk has to work very properly to ensure that there is accuracy in the accounting books.

 

What are Accounts Payable (AP)?

The accounts payable is the amount owed by the company to the creditors and suppliers. However, the Account Payable process will not include certain things like the mortgage, payroll, or any long-term debt.

What are accounts receivable (AR)?

The accounts receivable is the money customers and vendors owe to the company for which they are invoiced. The accounts receivable is listed in the current assets in the balance sheet.

Both accounts receivable and accounts payable tasks need to be done carefully to avoid errors. The errors in these tasks may create problems with the business relations with the customers, vendors, or other entities.

What is the Major difference between Accounts payable and accounts receivables?

The accounts payable and receivable clerk needs to be very careful while handling these activities. We will look here in more detail about the difference between both.

Here is the list of dissimilarities between accounts payable and accounts receivables:

1. Invoices/ Billing

In accounts payable, the invoices or billing is given to the company by external entities like customers, vendors, etc.

In accounts receivable, the invoices or billing is given by the company to the external entities like customers, vendors, etc.

2. Balance sheet position

In accounts payable, it is reflected under the current liability section of the balance sheet.

In accounts receivable, it is reflected under the current asset section of the balance sheet.

3. Reflection on types of accounts

In Payables management in India, it is reflected under the multiple accounts category like interest payable, sales payable, and income taxes payable.

In accounts receivable, it is reflected in only one account category of trade receivables.

4. Action

In accounts payable, the purchasing of the material is done on the credit.

In accounts receivable, the selling of the material is done.

5. Type of cash flow

In accounts payable, there is a cash outflow where the money needs to be paid.

In accounts receivable, there is a cash inflow where the company receives the money.

6. Types of bills

In accounts payable, there are bills payable and creditors.

In Accounts Receivables Management System, there are bills receivable and debtors.

There are some dissimilarities between accounts payable and accounts receivables. It is difficult to expect accuracy in this task from an accounts payable and receivable clerk. Outsourcing this task to an expert accountant or an agency can help you to get proper work done. They can give you accuracy in the accounting work.

Accounts Junction provides excellent accounts payable service and accounts receivable services. They have a team of experts to handle these activities efficiently. Their proficiency in using the accounting software helps the businesses to achieve better. Accounts Junction is an accounting service providing agency across the globe.

back top