Account Payables vs Account Receivables Understanding the Key Difference

What are Account Payables?
Accounts payable (AP), commonly referred to as "payables," signify a company's short-term financial obligations to its creditors or suppliers that remain unpaid. These obligations appear on the company's balance sheet as a current liability. In essence, when a company purchases goods or services on credit, it creates an account payable.

What are Account Receivables?
Accounts receivable (AR) represents the money that a company is entitled to receive for goods or services it has provided but for which it has yet to be paid. These amounts are listed on the company's balance sheet as current assets. Essentially, when a company sells a product or service on credit, it creates an account receivable. This indicates that the customer owes money to the company.