Accounts Receivables vs. Account Payables: Knowing the Difference

When first beginning to work with a new accountant, two common terms you will want to become well acquainted with are accounts payables and accounts receivables. Accounts payables are used to describe money which comes in and money which comes out of the business. An example of accounts payables could be computers or any other products and or goods.

Accounts receivables are the amounts a company can rightfully collect partly as a result of goods the company has sold or serviced on credit to a particular business or customer. In most cases, accounts payables are liabilities and accounts receivables tend to be assets.

Concrete Example

As an example of accounts payables, let’s pretend that your company has recently sold merchandise to another vendor on credit. Your company’s responsibility is to record a sale and from there record a receivable. The entity with whom you conducted business will then record a purchase and then also record an “account payable” and from there you will see a true accounts payable and receivable.

Means to Keep Track of Things

A good way to shed light on accounts payables and accounts receivables is to look at the old proverb which talks about the importance of giving and receiving. In a nutshell, it is a process which was designed to ensure that things don’t get lost in the translation of selling and buying which so often occurs.

These are also probably two very important daily items which any good accountant will constantly hassle you over to ensure you’re not getting lost or mixed up in the shuffle.

What other ways has your accountant worked with you on accounts payables and accounts receivables? Leave your comments below.

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