Accounts Payable/Receivable

Accounts Payable: Money which a company owes to vendors for products and services purchased on credit. Traditionally, this item shows on the company’s balance sheet as a current liability. Current Liabilities are expected to be fulfilled in less than a year. As accounts payable are paid in full, they display as a negative cash flow for the company.

Account Receivable : Money owed by customers (individuals or companies) to another entity in exchange for goods and/or services that have already been delivered or utilized, but that have not been yet paid for. Account Receivables most often come in as operating lines of credit and are usually owed within a comparatively short period of time, stretching from a few days to a year. On a public or private company’s balance sheet, accounts receivables are regularly recorded as an asset due to the fact that this represents a legal obligation for the customers to remit cash for its short-term debts within a period of time less than a year.