What’s the difference between Accounts Payable and Accounts Receivable?
What’s the difference between Accounts Payable and Accounts Receivable?

This is one of the most common questions we hear from new business owners and existing business owners alike.  As a business owner, you can be focused on so many different and conflicting topics at once, and bookkeeping issues often fall very far down the list of priorities.

What is the difference?

Accounts payable and accounts receivable are both accounts used when goods or services are bought and sold. What they have in common is that they both relate to transactions which are made on credit i.e. the payment for the good or services is delayed. The difference is actually quite clear from there titles – one is money to be paid (payable) and the other is money to be received (receivable).

Accounts payable is the account used when a business owes money to a supplier or another business for goods or services they have purchased from that business but have not yet paid for. It is a liability.

Accounts receivable is the account used when a business sells goods or services to a customer who has not yet paid and therefore owes the business the money. It is an asset.

The comparative chart below is a good reference tool:

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We can to train your current bookkeeper or offer in-house bookkeeping to all different types of small – medium sized businesses. If you have any questions regarding this or any other accounting topic, you can arrange an appointment by phone (03)9999 7200 or by clicking here


All information provided in this article is of a general nature only and is not personal financial or accounting advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

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