Receivable and Payable - What are These Accounts?

More financial terms?? Sometimes, financial terms get thrown around with no real explanation. But they are necessary to know and understand.

Here is an example of two terms you will come across in your business that mean something similar. This can make it confusing to remember the difference.

The first is ACCOUNTS RECEIVABLE. This is the money your customers owe you and is represented with an invoice. Since this will be cash you receive, it is considered an asset and categorized as income. You may be able to impose fines if your customers do not pay on time.

The other is ACCOUNTS PAYABLE. This is the other side of the coin. You owe this money to your vendors and may receive a fine if you don't pay on time. You will most likely get a bill letting you know how much you owe. Since you are paying out this money, it is considered a liability and classified as an expense.

The easy way to remember the difference? Receiveable = you receive money. Payable = you pay money.