Differentiating Accounts Receivable and Payable

This video tutorial explains the difference between accounts receivable and accounts payable, two fundamental concepts in accounting. Accounts receivable is used when a customer promises to pay in the future, while accounts payable is used when a business promises to pay a vendor. The video also discusses the term 'on account,' which indicates future payment. It highlights how receiving or paying money affects these accounts and provides key takeaways to help understand these concepts better.

What are the two similar accounts often confused by beginners in accounting?

• Income and expense accounts

• Cash and accrual accounts

• Asset and liability accounts

• Accounts receivable and accounts payable

Which account is used when a customer promises to pay in the future?

• Expense account

• Accounts payable

• Accounts receivable

• Revenue account

What does 'accounts receivable' represent in a business transaction?

• Expenses to be paid in the future

• Money to be paid to vendors

• Income received in advance

• Money to be received from customers

Which account is utilized when a business owes money to a vendor?

• Accrued revenue

• Prepaid expenses

• Accounts receivable

• Accounts payable

What does the term 'on account' typically refer to in accounting?

• Adjustments to inventory

• Direct cash transactions

• Year-end account closures

• Transactions involving accounts receivable or payable

How does receiving money from a customer affect accounts receivable?

• Increases accounts payable

• Has no effect on accounts receivable

• Increases accounts receivable

• Decreases accounts receivable

When a payment is made to a vendor, what happens to accounts payable?

• Decreases accounts payable

• Decreases accounts receivable

• Increases accounts payable

• Has no effect on accounts payable

What should you ask yourself to determine whether to use accounts receivable or payable?

• Is this transaction internal or external?

• Is this a cash or credit transaction?

• Am I receiving or paying money in the future?

• Is this a one-time or recurring transaction?

What is the primary action associated with accounts payable?

• Recording purchase returns

• Paying money to vendors

• Receiving money from customers

• Recording sales transactions

Where can one learn more about accounts receivable, payable, and other accounting topics?

• Business news websites

• Torynorman.com or YouTube

• Local accounting seminars

• Accounting textbooks