--- type: Resource Guide title: Accounts Receivable vs Accounts Payable: Differences Explained description: Accounts receivable is money owed to you; accounts payable is money you owe. See the side-by-side comparison, mirrored journal entries, and who should handle each. resource: https://accounting.events/resources/accounts-receivable-vs-accounts-payable/ tags: [accounts receivable vs accounts payable, AR vs AP, difference between accounts receivable and accounts payable, AP vs AR] timestamp: 2026-09-28 --- AR vs AP # Accounts receivable vs accounts payable The same transaction shown from both sides of the ledger, a clear comparison table, and the internal-controls question: can one person do both? By [**Accounting.Events editorial team**](/about/)Updated **September 28, 2026****9 min read** Summary - AR is money owed to you (a current asset); AP is money you owe (a current liability). - Every credit sale creates a receivable for the seller and a payable for the buyer. - Best practice keeps the AR and AP roles separate to protect against fraud and error. Quick answer **Accounts receivable (AR) is money customers owe you for goods or services you have delivered; accounts payable (AP) is money you owe your suppliers for goods or services you have received.** AR is a current asset (cash coming in); AP is a current liability (cash going out). They are two sides of the same credit transaction. When you sell on credit, you record a receivable and your customer records a payable for the identical amount. On the balance sheet AR increases with a debit and AP increases with a credit. As a vendor, your AR team issues invoices to customers; those invoices land in the customer's AP team for payment. The simplest memory aid is "AR sends, AP pays." Healthy businesses manage both deliberately, because AR funds the cash you use to settle AP. Accounts receivable and accounts payable are the two halves of how credit moves between businesses. One is your incoming cash, the other your outgoing cash, and the gap between how fast you collect AR and how slowly you can responsibly pay AP is a big lever on your working capital. ## The same sale from both sides of the ledger The fastest way to understand AR versus AP is to watch one transaction land on two companies' books at once. Acme Supplies sells $5,000 of goods to Bright Retail on Net 30 terms. Acme records a receivable; Bright records a payable. ### Seller: Acme books AR | Account | Debit | Credit | | --- | --- | --- | | Accounts receivable | $5,000 | | | Sales revenue | | $5,000 | An asset increases on Acme's balance sheet. ### Buyer: Bright books AP | Account | Debit | Credit | | --- | --- | --- | | Inventory (or expense) | $5,000 | | | Accounts payable | | $5,000 | A liability increases on Bright's balance sheet. The identical $5,000 is an asset to one company and a liability to the other. When Bright pays, the entries reverse: Acme debits cash and credits AR; Bright debits AP and credits cash. Here is how the two accounts compare across every dimension that matters. | Dimension | Accounts receivable | Accounts payable | | --- | --- | --- | | **What it is** | Money customers owe you | Money you owe suppliers | | **Balance sheet** | Current asset | Current liability | | **Cash flow** | Cash coming in | Cash going out | | **Normal balance** | Debit | Credit | | **Created when** | You invoice a customer | You receive a supplier bill | | **Key KPI** | Days sales outstanding (DSO) | Days payable outstanding (DPO) | | **Team goal** | Collect faster | Pay on time, not early | Source: [NetSuite, accounts payable vs accounts receivable](https://www.netsuite.com/portal/resource/articles/accounting/accounts-payable-accounts-receivable.shtml) Internal controls Because AR controls incoming cash and AP controls outgoing cash, best practice is to keep them separate. Letting one person record both creates a segregation-of-duties gap that raises fraud and error risk. Small teams that cannot fully separate the roles should add compensating controls, such as manager review of every payment and receipt above a set threshold. Source: [AccountingTools, separation of duties](https://www.accountingtools.com/articles/what-is-separation-of-duties.html) ## What is the difference between accounts receivable and accounts payable? Accounts receivable is money owed **to** you by customers and sits under current assets; accounts payable is money you owe **to** suppliers and sits under current liabilities. Every credit sale creates a receivable for the seller and a payable for the buyer, so they are mirror images of one transaction. AR brings cash in; AP sends cash out. ## Can AP and AR be done by the same person? Best practice says no. Combining accounts payable and accounts receivable in one person concentrates control over both incoming and outgoing cash, which violates segregation of duties and raises the risk of fraud or undetected error. Very small teams that cannot separate the roles should add compensating controls, such as manager approval of all transactions over a threshold and independent bank reconciliation. Source: [AccountingTools, separation of duties](https://www.accountingtools.com/articles/what-is-separation-of-duties.html) ## What are the 3 types of account? Under the traditional golden-rules approach there are three: **personal** accounts (people and entities, including customers and suppliers), **real** accounts (assets and property), and **nominal** accounts (income, expenses, gains, and losses). Accounts receivable and accounts payable are both personal accounts in this model. Modern US teaching instead uses five elements: assets, liabilities, equity, revenue, and expenses. Source: [HighRadius, three golden rules of accounting](https://www.highradius.com/resources/Blog/three-golden-rules-of-accounting/) ## What is the difference between AP and AR accounts? An AP account tracks what you owe vendors: it is credited when you receive a bill and debited when you pay. An AR account tracks what customers owe you: it is debited when you invoice and credited when they pay. AP carries a normal credit balance and lives under liabilities; AR carries a normal debit balance and lives under assets. ## Do I send invoices to AP or AR? If you are the vendor billing a customer, you send your invoice to their **accounts payable** department, which processes and pays it. Your own **accounts receivable** function is what generates and issues that invoice in the first place. The memory aid is "AR sends, AP pays": your AR creates the bill, their AP settles it. Source: [NetSuite, AP vs AR](https://www.netsuite.com/portal/resource/articles/accounting/accounts-payable-accounts-receivable.shtml) ## What are the 5 C's of accounts receivable management? They are the five C's of credit, used to decide whether to extend terms to a customer before they ever become a receivable: **Character** (payment track record), **Capacity** (ability to pay), **Capital** (financial reserves), **Collateral** (security available), and **Conditions** (the wider economic and deal context). Strong credit vetting up front is the cheapest way to keep AR healthy. Source: [Corporate Finance Institute, the 5 C's of credit](https://corporatefinanceinstitute.com/resources/commercial-lending/5-cs-of-credit/) ## What is the 10 rule for accounts receivable? The cross-aging "10% rule": if more than 10% of a customer's total receivables are overdue (typically past 90 days), the whole account is reclassified as high-risk, not just the overdue portion. It is widely used by lenders when calculating a borrowing base, and as a credit-control trigger for tightening terms on a slow-paying customer. Source: Emagia, the 10 rule for accounts receivable ## What is the best KPI for accounts receivable? **Days sales outstanding (DSO)** is the most widely used AR KPI, because it shows in plain days how long it takes to convert credit sales into cash. It is best paired with the **collection effectiveness index (CEI)**, where 80 to 90% or higher is strong, and your **AR aging** profile. On the AP side, the equivalent headline KPI is days payable outstanding (DPO). Source: [ApprovalMax, accounts receivable KPIs](https://blog.approvalmax.com/accounts-receivable-kpis) ## Related reading Independent software reviews and guides from Accounting.Events. [Resource ### Is accounts receivable a debit or credit? Why AR is a debit and AP is a credit, with T-account entries. Read more →](/resources/is-accounts-receivable-a-debit-or-credit/)[Buyer's guide ### Best accounts receivable software in 2026 Tools that automate the AR side so collections keep pace with payables. Read more →](/reviews/best-accounts-receivable-software/)[Resource ### What is accounts receivable? The full definition, with journal entries and benchmarks. Read more →](/resources/what-is-accounts-receivable/) AE [Accounting.Events editorial team](/about/) The Accounting.Events editorial team researches and maintains the software comparisons on this site. Rankings are built from published vendor pricing, verified third-party reviews on the Xero App Store, G2 and Capterra, and primary-source statistics. Every guide carries the date it was last checked. Figures here are drawn from public sources; always confirm with your accountant or the linked source before acting. Last updated September 28, 2026. This guide is general information, not accounting, tax, or financial advice.