Accounts Payable vs Accounts Receivable
Category: Accounting | Published: 30 September 2026 | Last Updated: 30 September 2026
Accounts payable is money you owe to suppliers; accounts receivable is money customers owe you. Here is how to manage both to protect your cash flow.
Two terms appear in almost every set of accounts: accounts payable and accounts receivable. Managing both well is one of the simplest ways to protect your cash flow.
What Is Accounts Payable?
Accounts payable (AP) is the money your business owes to suppliers and service providers for goods or services received on credit. In your Balance Sheet it appears as a current liability — often as "sundry creditors" in Tally.
Example: you buy stock worth ₹50,000 from a supplier with 30 days to pay. Until you pay, ₹50,000 is in accounts payable.
What Is Accounts Receivable?
Accounts receivable (AR) is the money customers owe you for goods or services you supplied on credit. It appears as a current asset — "sundry debtors" in Tally.
Example: you complete a job and invoice a client ₹80,000, payable in 15 days. Until they pay, ₹80,000 is in accounts receivable.
Key Differences
Direction: AP is money going out; AR is money coming in.
Balance Sheet: AP is a liability; AR is an asset.
Documents: AP comes from supplier bills; AR comes from your sales invoices.
Goal: pay AP on time without paying too early; collect AR as quickly as possible.
Managing Accounts Receivable
Send invoices promptly with clear payment terms.
Review an ageing report (0–30, 31–60, 61–90, 90+ days) every month.
Follow up politely but regularly on overdue amounts.
Confirm balances with major customers periodically.
Managing Accounts Payable
Record supplier bills as soon as they arrive.
Check each bill against the purchase order and goods received.
Plan payments by due date to avoid late charges and keep good supplier relationships.
Make sure supplier GST invoices appear in your GSTR-2B before claiming credit.
Why It Matters for Cash Flow
If customers pay slowly while suppliers expect quick payment, your business can run short of cash even when it is profitable. Watching both balances every month helps you plan.
Frequently Asked Questions
Is accounts receivable the same as revenue?
No. Revenue is recorded when you make the sale; accounts receivable is the part of that revenue not yet collected.
What is a debtor or creditor ageing report?
A report that groups outstanding amounts by how long they have been due, so you can focus on the oldest balances first.
Need help tracking payables and receivables? See our Accounting & Bookkeeping services.
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Disclaimer: This article is general information and not professional advice for your specific situation.