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Accounts Payable

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WHAT ARE ACCOUNTS PAYABLE

Accounts payable (AP) is an accounting entry that represents an entity’s obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities.

Accounts payable are often referred to as “payables”.

Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

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WHAT ARE ACCOUNTS RECEIVABLE

Accounts receivable (AR) refers to money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year.

On a company’s balance sheet, accounts receivable is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts