Short answer
Accounts payable are bills your organization owes; accounts receivable are amounts others owe your organization. After a credit purchase or sale, the buyer’s unpaid bill is payable on the buyer’s books, while the seller’s amount awaiting collection is receivable on the seller’s books. Always name whose records you mean. 1 2
On this page
At a glance
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| Question | Accounts payable | Accounts receivable |
|---|---|---|
| Who owes whom? | The organization owes another party | Another party owes the organization |
| Credit-transaction perspective | Buyer’s unpaid bill | Seller’s unpaid invoice |
| Immediate task | Pay the bill | Collect the amount owed |
| IRS trust-glossary treatment | Liability, grouped with accrued expenses | Asset for credit sales of products or services |
The balance-sheet descriptions here come specifically from the IRS split-interest trust glossary. 1 2
What each thing is
Payables describe an obligation facing the organization; receivables describe an amount due to it. BLS uses these terms for organizational bookkeeping generally. The IRS supplies a more specific receivable definition tied to products or services delivered on credit, within its trust-study glossary. 1 2
Key differences
The decisive difference is the direction of the obligation, not whether a document is called an invoice. An unpaid invoice can represent a bill to pay for its recipient and an amount to collect for its issuer. The entity’s relationship to that invoice determines the label. 1 2
How to tell them apart
First identify the reporting entity. Then ask: “Does this entity owe the amount, or is the amount owed to it?” That separates payable from receivable direction. Its limit: direction alone does not establish the exact account category; the IRS glossary separately lists loans, notes, and other receivables. 1 2
Where they overlap
Both belong to the records handled by bookkeeping and accounting staff, alongside expenditures and receipts. They can also be opposite views of the same credit transaction. Specialized clerk titles may distinguish payable work from receivable work, but both concern recording and tracking organizational accounts. 1
Edge cases
Not every obligation belongs under accounts payable, and not every amount due belongs under trade accounts receivable. The IRS trust glossary separately identifies mortgages and notes payable and several kinds of loan-related receivables. Its combined “accounts payable and accrued expenses” entry also should not be read as making those two terms identical. 2
Why the distinction exists
Separating amounts to pay from amounts to collect preserves the organization’s position in each transaction. In the IRS trust glossary, that difference also separates obligations recorded as liabilities from credit-sale receivables recorded as assets. The labels answer different questions even when they concern the same unpaid amount. 1 2
Common misconceptions
“Receivable” does not mean cash already received: the IRS definition concerns money still owed for a credit sale. “Payable” likewise identifies a bill awaiting payment, not simply money already spent. BLS distinguishes these accounts from the expenditures and receipts that clerks also record. 1 2
Examples
Two hypothetical applications:
- A shop buys supplies on credit and has not paid the invoice. On the shop’s books, that bill is accounts payable; on the supplier’s books, the amount owed is accounts receivable.
- A consulting business completes a service on credit. Its unpaid customer invoice is accounts receivable; the customer organization views the same bill as accounts payable. 1 2