Accounts Receivable and Accounts Payable: Main Similarities and Differences
Accounts receivable and accounts payable are two sides of the same coin. In one case, they represent the amount of money your customers owe you, while in the second case it is the amount you owe your suppliers. However, in practice, they are quite different concepts that have very different implications for companies.
The main difference between them is that while accounts receivable refers to trade credits provided to customers, accounts payable refers to credits provided by your suppliers. In the future, they imply an inflow or an outflow of cash, respectively.
In addition, from the accounting point of view, accounts receivable are an asset, since a collection right is generated that will materialize in money in the future. On the contrary, accounts payable are accounted for in the liability account, because a debt is generated that will have to be paid at a later time.
Finally, in most companies, although both are part of their treasury departments, they are managed and administered by different teams with totally different skills. You have to think that, in the case of accounts receivable, many large companies carry out exhaustive controls on the risk of their clients to reduce delinquency, something that does not happen in the case of accounts payable.
Not surprisingly, the American Institute of Certified Public Accountants (AICPA), the most important accounting association in the United States, considers the segregation of these functions as a fundamental accounting principle, which serves as a form of control and reduction of the risk of fraud in the business.