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Let me hold a Dollar!

I was on the phone the other day contacting a client regarding a pending invoice. The company representative asked me this question, accounts payable or receivable? I was stumped, who exactly was I looking for? Do I need to get in touch with my contact and ask this question? Will I sound dim-witted? I pretended that the phone was breaking up and I hung up. But I was perturbed and thought, let’s explore this a bit.

Let’s assume that Company A sells merchandise to Company B on credit. (Perhaps the invoice states that the amount is due in 30 days.) Company A will record a sale and will also record an account receivable. Company B will record the purchase (perhaps as inventory) and will also record an account payable.

Our example reminds me of an old saying, “There are two sides to every transaction.” In accounting we also expect symmetry: Company A has a sale and a receivable, Company B has a purchase and a payable.

The main difference is one receives the cash and the other spends the cash.

Accounts Payable tracks the bills or debts a company incurs and pays them accordingly. Accounts receivable tracks the money owed to the company.

Adding to the above,

1. AR is an asset & AP is a Liability – in an Organization

2. AR means – Debtors & AP – Creditor

3. An Org. is itself AR (Debtors) & AP (Creditor) to other org.

Being in , it is very important to keep track of your . It is also advisable to let your understand the terms that we offer and for them to make sure the payments are processed on time. At times, translation are time sensitive, but your clients should know that for a prompt delivery, prompt payment is necessary as well. This is a key point in managing recurrent clients who send on a weekly basis. After all, this is your money.