Accounting



What is the difference between accounts payable and accounts receivable?

When a company purchases goods or services on credit, it will increase its accounts payable (a current liability). When a company sells goods or services on credit, it will increase its accounts receivable (a current asset).

Just as one company’s purchase is another company’s sale, the accounts payable of one company will be the accounts receivable of another company. Some accountants refer to this as symmetry.

To illustrate this, let’s assume that Max Corporation receives $5,000 of goods it ordered from Super Supply Company on credit. This transaction will result in Max recording a $5,000 accounts payable (and a purchase), and Super Supply recording a $5,000 accounts receivable (and a sale).

Learn more about the Balance Sheet.

Related Questions
the accounting coach

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.




Comments

9 Responses to “What is the difference between accounts payable and accounts receivable?”

  1. saman on November 14th, 2009 6:27 am

    Hi,,Plz solve a questions with examples …then i understand easily solve the accounting questions…plzzz

  2. DILDAR ALI SAMO on November 18th, 2009 8:19 pm

    If the net profit earned during the year is Rs. 50,000 and the amount of debtors in the beginning and at the end of the year is Rs. 10,000 and Rs.20,000 respectively, then the cash from operations will be equal to Rs.________ .

  3. wilson ngwenya on December 2nd, 2009 9:02 am

    i always get encouraged with your questions and notes.there are helpful to me in my studies.thanx

  4. Mohiuddin Hunzai on December 3rd, 2009 11:02 am

    i really enjoyed to learn about accounts payable and accounts receivable which has explained in your session. thank you very much Accounting Coach.com

  5. sureshah on January 20th, 2010 7:50 am

    i very happy with your explation of session. It very much use for freshes and experienced who has forgotten old acconting system.

  6. surur on March 7th, 2010 2:47 am

    how to slove the trail balance

  7. elizabeth wan on March 12th, 2010 12:27 pm

    hi..
    nice to meet you..i just to know how to solve the income stetement and balance sheet if the trial balance is below:
    DESCRIPTION DT CT
    1.incorporation company 70
    2.cash 2929.10
    3.rental prepaid 2500
    4.stationary expenses 140
    5.office equipment 16
    6.bank account 2075
    7.project expenses 2075
    8.entertainment 162.50

    thank you..

  8. Phalla on May 16th, 2010 11:03 pm

    Hi there,
    I am very nice to see your website.
    I am a fresh student of accounting and now i i have many queries concerned to asking for your help as below:

    1. What is the difference between Accounts Receivable and Accounts Payable?
    2. Why are Accounts Receivable and Cash considered Current Asset while Properties & Equipment are considered Fixed Asset?
    3. What is the difference between Current Asset and Fixed Asset?

    Please kindly advice me for all above questions.

    I am looking forwards to hearing from you as soon as possible.

    Thanks & Regards,
    Phalla

  9. jenna on June 4th, 2010 12:04 pm

    Phalla, why do you ask when it’s already been answered what accounts payable and receivable are?
    2. Because “current” assets are Short-term, while Fixed assets are Long-term.
    3. Like I said, long-term, short-term.
    That’s all there is to it ;-) hope that helps

Leave a Reply