Payables and receivables
Accounts payable (AP) is the amount owed for the purchase of goods or services at a specific date. Accounts payable is recorded at the time an invoice is approved for payment and recorded in the General Ledger (or AP sub-ledger) as an outstanding, or open, liability because it has not been paid. Payables are often categorized as Trade Payables (i.e., payables for the purchase of physical goods that are recorded in Inventory), and Expense Payables (i.e., payables for the purchase of goods or services that are invoiced). Common examples of Expense Payables are advertising, travel, entertainment, office supplies, and utilities. AP is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received.
Accounts receivable represents claims that are expected to be collected in cash. Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, known as credit terms or payment terms.