Accounts payable vs accounts receivable
Each, defined
Accounts payable
Accounts payable — What we owe vendors for bills already received.
Accounts receivable
Accounts receivable — What customers owe us for invoices already issued.
Side by side
| Accounts payable | Accounts receivable | |
|---|---|---|
| What it is | Owed by the company to suppliers | Owed to the company by customers |
| Balance sheet | Current liability | Current asset |
| Created by | A vendor bill | A customer invoice |
| Measured by | Days payable outstanding (DPO) | Days sales outstanding (DSO) |
Both sides of Northwind's working capital
At September 2026 month-end Northwind is owed $8,000 by customers and owes suppliers $6,000. Measured in days of the month's flow, customers take 10.9 days to pay and Northwind takes 10.6 days. (Northwind Traders, Inc., September 2026, accrual basis, USD.)
| Accounts payable | Accounts receivable | |
|---|---|---|
| Balance at month-end | 6,000.00 | 8,000.00 |
| Flow it is measured against | 17,000.00 | 22,000.00 |
| Days outstanding | 10.6 days | 10.9 days |
How they relate
The two are mirror images: one company's payable is another's receivable. Both are created when goods or services change hands before cash does, and both are cleared by a payment.
Managed together they decide how much cash the business ties up. Collecting receivables faster and paying suppliers on their terms, not early, shortens the cash conversion cycle.
Questions
- Are AP and AR current?
- Both are usually current: due within a year. Receivables are a current asset; payables a current liability.
- Which metric measures each?
- DSO for receivables — days of sales still uncollected — and DPO for payables — days of purchases still unpaid.
Also confused with these
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
- DPO calculatorDPO is a liquidity and working-capital metric, calculated as (Ending AP ÷ COGS for the period) × Days in the period.Calculator
- DSO calculatorDSO is a liquidity and working-capital metric, calculated as (Ending AR ÷ Credit sales for the period) × Days in the period.Calculator
- Journal entry for accounts payableWhen an approved vendor bill is entered, debit the expense or asset it bought and credit Accounts payable. When it is paid, debit Accounts payable and credit Cash.Entry
- Journal entry for a sale on accountFor a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.Entry
- Journal entry for writing off accounts receivableTo write off an uncollectible invoice under the allowance method, debit Allowance for credit losses and credit Accounts receivable. If the customer later pays, reinstate the receivable (debit Accounts receivable, credit Allowance) and record the cash.Entry
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.