* Accounts receivable (AR) is the balance of money owed to a firm for goods or services delivered or used but not yet paid for by customers.
* It represents the amount that customers owe the company for purchases made on credit.
* AR is a current asset on a company's balance sheet and is typically listed under the heading of "Accounts Receivable" or "Trade Receivables."
* Effectively managing accounts receivable is crucial for maintaining a healthy cash flow and ensuring that the company receives payment for its products or services promptly.
AP (Accounts Payable):
* Accounts payable (AP) represents the amount a company owes to its suppliers or creditors for goods or services received but not yet paid for.
* It is a current liability on a company's balance sheet, typically listed under the heading of "Accounts Payable" or "Trade Payables."
* Effectively managing accounts payable is essential for maintaining good relationships with suppliers, ensuring timely payments, and avoiding late payment penalties or damage to the company's credit reputation.