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Differences between Account Payables and Account Receivables

Any company's operations have financial transactions at its core. Whatever happens in a company, it ends in the exchange of money between two parties. But, not all businesses work on purely cash or upfront payment systems. They resort to the credit facility to maintain relationships, and sometimes, to make the business process easier for the entities involved. This system of doing business gives rise to terms like Account Payables and Account Receivables.

The basic difference between Account Payables and Account Receivables

As evident from the names, the Account payables include the company's due payments to the vendors, banks, financial institutions, or other business entities. The company is keeping the money payable on hold, which can be due to many reasons. The company may purchase the material from the vendors on credit too. So, to understand the total liability, account payables record is maintained by the companies.

Account receivables is another head that shows the amount that other parties owe to the company. These parties are mostly customers who get into some sort of understanding to make the company's payment in a systematic or structured manner. The parties purchase the items, goods, raw materials, and other supplies from the company on credit, all the proceeds from these sales are put under the head Account Receivables.

Example of Account receivable

Let's understand the terms through an example and find how they are computed in a balance sheet.

What happens when the sale has happened, and the payment is made?

When a company sells a product or services on credit it is consider accounts receivable. On the general ledger journal, it will show as a Debit to account receivables XXX credit to sales account XXX. The sales account is a revenue account which show up on the income statement, and the A/R is an asset account.

When the payment is received the journal entry will be Debit to cash XXX then credit to accounts receivables XXX. Both accounts are assets accounts.

How to record Account payables

The sole purpose of recording is to find at any point in time the amount payable and the information about the company with whom the transaction has been made.

The Account payable appears in the journal as:

Date of transaction, department for which the equipment is purchased; Account payable entry shows the credit of said amount, and the debit head mentions the department's expense. In this case the equipment is an asset to the company. So, the cost of this purchase needs to be deprecated over the period of life.

To record a payment for A/P. It necessary to Debit the A/P account XXX and credit the cash account XXX.

So, the basic function is to find the total asset or total liability of the company; the record can

help investors understand if the company is in a healthy state or not.

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Book Clean up Services:

 

I will find the errors in the books and clean them up. If the accounts have not been reconciliation in six months or less. Or if the books have not been updating with in the past 6 months or so. If is it longer than six months, it might begin necessary for you do download all the transaction to excel spread sheet from the bank and then I can start the clean up process at that time.

Provide Eight Reports:

 

Using QuickBooks Online I will provide the weekly report to the owner. Reports will be Balance Sheets, Profit and loss, Cash Flow statement, Accounts Payable, Accounts Receivable, Bank and Credit Card Report last 30 days, Uncleared Transactions and Uncategorized income and uncategorized Expenses. I will set up the chart of accounts and maintain their books. I will provide them with eight reports on a weekly basis. I will explain the reports to the client so they will be able to understand what is going on. This is the top-of-the-line services that I going to offer to the client.

Balance Sheet: A report that consists of the asset’s accountant balances minus the liabilities and the owner equity or the shareholders equity.

Income Statement:  A report that gives your all the income the company minus all the expenses which the company had during in period of time. There are some expenses that was prepaid expenses which show up on the statement that was not paid with cash in that period of time.

 

Cash Flow Statement: This is a statement shows the cash inflows by the operation of the business and the investment income. The out of cash flow show the payment of the operations activities along with the investment in each period of time.

Accounts Payable Summary: This report shows the company owns money due. The time frame that the own amount is either current or past do and how far past due.

Accounts Receivable Summary: This report is important to you as an owner operator truckdriver because it show if one of your customer is failing behind on paying you.

Hopefully I will finish this page up tomorrow 2/12/2021.