What is the main difference between accounts payable and accounts receivable?

The main distinction between accounts payable and accounts receivable lies in their definitions and the roles they play in a business's finances. Accounts payable represent the obligations a company has to pay its suppliers for goods and services received. This means that the business owes money to its creditors, representing a liability on the business’s balance sheet.

On the other hand, accounts receivable denote money owed to the business by its customers for products or services rendered. This reflects the business's rights to collect payment, making accounts receivable an asset on the balance sheet.

This fundamental difference defines how these accounts impact a company's financial health and cash flow management. In summary, accounts payable are about what the business owes, while accounts receivable are about what is owed to the business.