All about accounts payable and accounts receivable

All about accounts payable and accounts receivable

Grow your knowledge of accounting by learning about accounts payable and accounts receivable.

What are accounts payable?

Accounts payable is also known as your purchase ledger. It is a register containing information on which invoices have arrived from which suppliers, what has been paid and other information about the suppliers.

What are accounts receivable?

Accounts receivable is also known as your sales ledger. It is information on money your customers or other third parties owe you, like outstanding invoices that have yet to be paid to you.

How to find accounts receivable and accounts payable

When you do your accounting using automated software, you can find your accounts payable or receivable on your balance sheet.

How to see the breakdown of accounts payable and receivable

If you use an accounting software, you can usually view a breakdown of what is owed from your customers and what is owed to your suppliers at a specific date.

To see what you owe to suppliers look at the Aged payables report (also known as Aged creditors). To see what you’re owed from your customers view the Aged receivables report (also known as Aged debtors.

If you’re using Bokio accounting software it’s really simple to see the breakdown of accounts payable and receivable. You can find it under Customers or Suppliers, then click on the History tab.

How to use your balance sheet

Your balance sheet can seem confusing, but it works like this: assets - liabilities = equity

So, it’s important to have a healthy equity, which means that your assets are considerably more than your liabilities.

If you have shareholders, keeping a healthy equity can be a challenge. The more the shareholders make the more they are likely to take out of the business as dividends, which will also lower the equity in the business.

Your balance sheet isn’t really a direct measurement of growth, but it is always good to check in and make sure you’re continuously increasing your equity. It’s very important that you don't end up in a situation where you have more liabilities than what you own, which is known as negative equity.

Do your accounting with Bokio

With Bokio’s free accounting software, you can do your bookkeeping, invoicing, and expenses all in the same place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records.

Accounting is kept simple with Bokio, so you have more time to spend running your business.