The Key Difference Between Account Payable and Account Receivable

Account Payable vs Account Receivable
Feature	Account Payable	Account Receivable
Definition	The amount a company owes to its suppliers or creditors for goods and services received.	The amount a company is owed by its customers for goods or services delivered on credit.
Financial Statement	Appears on the liabilities side of the balance sheet.	Appears on the assets side of the balance sheet.
Nature	Short-term liability.	Short-term asset.
Cash Flow Impact	Represents future cash outflow.	Represents future cash inflow.
Role	Indicates money owed to others.	Indicates money owed by others.
Involves	Purchases made on credit from vendors or suppliers.	Sales made on credit to customers or clients.
Example	Company buys office supplies and agrees to pay in 30 days.	Company sells products to a retailer on a 60-day credit term.
Management Goal	Delay payment without harming supplier relations.	Speed up collection to maintain healthy cash flow.
Effect of Increase	Improves short-term liquidity (more cash retained).	Indicates growth in sales but may strain cash flow if not collected timely.
Recording Time	When a purchase is made on credit.	When a sale is made on credit.
Settlement	Paid to suppliers or service providers.	Collected from customers or clients.
Accounting Entry	Credit to Accounts Payable, debit to relevant expense or asset account.	Debit to Accounts Receivable, credit to sales revenue.
Risk	Late payments can damage credit rating or supplier trust.	Non-payment can result in bad debts or write-offs.
Monitoring Tool	Aged Payables Report.	Aged Receivables Report.