Explain the difference between accounts receivable and accounts payable.

Accounts Receivable vs. Accounts Payable

Accounts Receivable and Accounts Payable are both important aspects of a company's financial structure. Here is a brief explanation of the key differences between the two:

Accounts Receivable:

Accounts Receivable refer to the money owed to a company by its customers for goods or services that have been sold on credit. In other words, it represents the amount that customers owe to the company for purchases made on credit. Accounts Receivable are considered assets on the company's balance sheet and are usually collected within a specified period of time.

Accounts Payable:

Accounts Payable, on the other hand, refer to the money that a company owes to its suppliers or vendors for goods or services that have been purchased on credit. In simple terms, it represents the amount that the company owes to its creditors. Accounts Payable are considered liabilities on the company's balance sheet and are typically paid within a specified period known as the payment terms.

In summary, Accounts Receivable represent money owed to the company by customers, while Accounts Payable represent money owed by the company to suppliers.