Info about F and A

Accounts Payable - AP

Payables are not limited to corporations. At the household level, people are also subject to bill payment for goods or services provided to them by creditors. For example, the phone company, the gas company and the cable company are types of creditors. Each one of these creditors provide a service first and then bills the customer after the fact.

The payable is essentially a short-term IOU from a customer to the creditor.

Accounts payable are often referred to as "payables". 

Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

Accounts Receivable - AR

On a public company's balance sheet, accounts receivable is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts.

Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their employers in the form of a monthly orbi-weekly pay check.

They are legally owed this money for services (work)already provided.

General Ledger

General ledger is typically used by businesses that employ the double-entry book keeping method - where each financial transaction is posted twice, as both a debit and a credit, and where each account has two columns.Because a debit in one account is offset by a credit in a different account,the sum of all debits will be equal to the sum of all credits. 

A company's general ledger can either be a physical book into which credits and debits are posted, or an accounting computer program where the various credits and debits are entered. The general ledger's double-entry bookkeeping requires that each transaction will be entered on the left side, or debit side, of one account and simultaneously on the right side,or credit side, of another account. 

A general ledger is used to prepare financial statements directly from the accounts, and as a means to identify errors and/or instances of fraud.

Differences between AP & AR

Refers to

Money that the company owes to others

Money that others owe to the company




Paid to whom?

Accounts payable are amounts a company owes because it purchased goods or services on credit from a supplier or vendor.

Accounts receivable are amounts a company has a right to collect because it sold goods or services on credit to a customer.

Recorded as

Liability (payable always a liability)

Asset (receivable always an asset)

How each affects a business?

Accounts payable will decrease a company's cash

Accounts receivable will increase a company's cash

What Causes this Transaction?

Purchasing goods on credit

Selling goods on credit