What is accounts receivable and payables?

Question

Accepted Answer

Accounts receivable and payables are financial terms used in accounting to track money owed to a company and money owed by a company.

Accounts receivable refers to the money owed to a company by its customers or clients for goods or services provided on credit.
Accounts payable refers to the money owed by a company to its suppliers or vendors for goods or services received on credit.
Accounts receivable is an asset on the company's balance sheet, while accounts payable is a liability.
Accounts receivable represents the company's right to receive payment, while accounts payable represents the company's obligation to make payment.
Managing accounts receivable and payables is crucial for maintaining healthy cash flow and financial stability.
Example: If a company sells products to a customer on credit, the amount owed by the customer becomes accounts receivable for the company. On the other hand, if the company purchases raw materials from a supplier on credit, the amount owed to the supplier becomes accounts payable for the company.

Accepted Answer

Accounts receivable and accounts payable are both important aspects of a company's financial operations.

Accounts receivable refers to the money that a company is owed by its customers for goods or services that have been provided but not yet paid for. This is considered a current asset on a company's balance sheet because it is expected to be collected within a year.

On the other hand, accounts payable refers to the money that a company owes to its vendors or suppliers for goods or services that have been received but not yet paid for. This is considered a current liability on a company's balance sheet because it is expected to be paid within a year.

Managing accounts receivable and accounts payable is important for maintaining healthy cash flow and ensuring that a company is able to pay its bills and collect payments from customers in a timely manner.

What is accounts receivable and payables?

Popular interview questions of Credit Administrator