Accounts Payable vs Accounts Receivable

Finance is always a major part of any business no matter the size of the business, whether it is Small size or large size business. So, it is important to understand this, there are various forms of business accounting if you are starting a business then you need to have full knowledge of them. Accounts Receivable and Accounts Payable are the key accounts, which should be covered in accounting practices.  Accounts receivable are money customer owes to the company, while Accounts payable are the money which a company owes to the suppliers. The comparison between- Accounts payable vs Accounts receivable is made with the current ratio.

Both of them are interlinked and cannot be cut apart- This is similar to two sides of the coin!

They are used to record the incoming and outgoing cash flow.

In this article, we will talk about accounts payable vs receivable in details:

ACCOUNTS RECEIVABLES VS. ACCOUNTS PAYABLE| SIMILARITY |DIFFERENCE

 

SIMILARITY:

First of all, we will talk about how they are similar?

Accounts Receivable handles the money that comes into the business and on the other hand Accounts Payable handles what you owe to others.

Both of them take advice from each other while buying and selling.

·    They both work together, when account receivables get to know that there is high consumer demand then they let the Accounts payable know that more supplies will be needed.

·    Both of them are important, as without proper management this could break the company and can affect the growth.

 

DIFFERENCES:

·     Accounts payable maintain the record of the finance that a company owes to the creditor for the service they bought.

·         Accounts receivables record the total amount owed by others to the company.

·         Accounts payable is compatible with both short- and long-term debt promises.

·         Payable lower the company’s new cash.

·         Other increases the company’s cash flow.

·         Accounts payable are a liability.

·         Accounts receivables are assets.

 

There are always two sides to every transaction and it is also called as symmetry:

At the time of Sale:

·         Company 1 reported a sale and a current asset

·         Company 2 reported a purchase and a current liability.

 

Then at the time of payment:

·         Company A cash increased and AR decreased.

·         Company B cash decreased and AP decreased.

 

ACCOUNTS PAYABLE VS. ACCOUNTS RECEIVABLE: HOW DO THEY BALANCE?

 

Company’s balance sheet is related to accounts payable and accounts receivable and this keeps the business in a strong position.

Accounts payable also helps in resolving the bill issues and make the payment on time. You can also guarantee centralized financial data recovery as it streamlines business workflow.

 

WRAPPING UP:

Both the accounts payable and accounts receivables play an important role in securing the company’s cash flow. We have discussed all inwards flow (Accounts Receivables) and outwards flow (Accounts Payable). If you have wanted to know Accountants Near Me then you contact Accounts Confidant services contact our Expert Bookkeepers at our toll- free number 1-844-860-1101.