Accounts receivable (AR) is money customers owe a business; accounts payable (AP) is money the business owes suppliers. AR is generally a current asset and an expected cash inflow, while AP is generally a current liability and an expected cash outflow. A quick memory aid: receivable means the business expects to receive; payable means it must pay.
Accounts receivable vs. accounts payable at a glance
| Question | Accounts receivable (AR) | Accounts payable (AP) |
|---|---|---|
| Who owes whom? | A customer owes the business. | The business owes a supplier or vendor. |
| Typical source | A credit sale: the business provides goods or services and invoices the customer. | A credit purchase: the business receives goods or services and a bill or invoice. |
| Usual balance-sheet class | Current asset, assuming expected settlement within the normal operating cycle or short term. | Current liability, assuming expected settlement within the normal operating cycle or short term. |
| Cash direction at settlement | Cash comes in when the customer pays. | Cash goes out when the business pays. |
| What increases the balance? | A credit sale or revenue earned before collection. | A purchase or expense incurred before payment. |
| What reduces the balance? | Customer payment. | Payment to the supplier. |
| Typical double-entry normal balance | Debit. | Credit. |
The normal-balance convention is a useful introduction to double-entry bookkeeping, not a rule that an account can never have an unusual balance. Classification can also depend on the expected settlement period and the business’s operating cycle.
What the balances mean—and what they don’t
AR and AP are unsettled amounts, not synonyms for sales and expenses. AR records what remains due from customers; it is not itself revenue. AP records what remains due to suppliers; it is not itself an expense account. The transaction that created the balance may involve revenue, an expense, or an asset, depending on what was sold or purchased.
For example, an unpaid customer invoice is AR. Once the customer pays, the receivable falls and cash rises. An unpaid supplier bill is AP. Once the business pays it, the payable falls and cash falls. These balances help show claims and obligations that exist before cash changes hands.
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Under accrual accounting, a business can record a receivable when it earns revenue, or a payable when it incurs an expense or receives a purchase, even if payment happens later. Intuit describes accrual accounting as recording pending and completed income and expenses whether or not the money has been paid or received; its glossary was updated August 3, 2026: QuickBooks accounting glossary.
In cash-basis bookkeeping, transactions are generally recorded when money changes hands, so unpaid invoices and bills may not appear in the same way. That can make it harder to see amounts still owed. The appropriate accounting basis and treatment depend on the business and applicable requirements.
How the entries work in a simple example
A business makes a credit sale
When a business earns revenue but has not yet collected payment, it commonly debits AR and credits revenue. When the customer pays, the business debits cash and credits AR, clearing the receivable.
A business makes a credit purchase
When a business incurs a cost or buys an asset on credit, it commonly records the relevant expense or asset and credits AP. When it pays the supplier, it debits AP and credits cash. The account paired with AP depends on what the business bought and the accounting facts. In ordinary double-entry treatment, debits increase assets and credits increase liabilities; see Intuit’s accounting glossary.
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Examples of AR and AP
- Consulting firm (AR): The firm completes a project and invoices its client. Until the client pays, the amount due is a receivable.
- Contractor or software provider (AP): A business receives a bill and plans to pay it later. Until settlement, the unpaid amount is a payable.
- Café illustration: Stripe uses a $1,000 supplier invoice due in 30 days as an AP example and a $2,500 catering invoice due in 30 days as an AR example. These are illustrations, not typical or average invoice amounts: Stripe’s guide to accounts payable and accounts receivable.
- Accrual timing illustration: QuickBooks describes a tree-service company billing a customer $500 on March 25 and receiving payment on April 6. In its example, revenue is recorded in March and AR is cleared when cash arrives in April. This is an educational example, not a rule for every accounting basis or jurisdiction: QuickBooks’ AR vs. AP guide.
Why the difference matters for cash flow
AR and AP create opposite sides of a timing gap. A business may record a sale before it receives the money, while its supplier bills may fall due before customers pay. If the business pays suppliers before collecting customer invoices, cash available for operations can be tight even when sales have been recorded. Stripe explains that longer customer payment delays increase receivables and leave less cash available for operations, while paying suppliers within agreed terms helps manage short-term timing: Stripe’s guide.
Keep track of customer payments
- Use an AR aging schedule to group unpaid invoices by how long they have been outstanding.
- Monitor unpaid invoices and follow a documented collection process so expected inflows are visible and follow-up is consistent.
Keep track of supplier bills
- Record invoices, due dates, approvals, and payment status.
- Use that information to plan cash needs and pay within agreed terms, helping avoid late payments.
QuickBooks discusses aging schedules and collections monitoring, while Stripe covers payment timing and bookkeeping workflows: QuickBooks’ guide and Stripe’s guide.
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Frequently confused terms
- AR is not cash already received. It is an amount due from a customer; collection is the step that brings in cash.
- AP is not necessarily a bill already paid. It is an amount the business still owes; payment settles the obligation.
- Revenue and expenses are not the same as AR and AP. The income or cost can be recognized before settlement under accrual accounting, while the receivable or payable tracks the remaining amount due.
This is a general bookkeeping explanation, not jurisdiction-specific tax, statutory-reporting, or accounting-policy advice. Unusual settlement arrangements may need a more specific classification analysis.
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