Accounts receivable is money customers owe a company for goods or services already delivered. Accounts payable is money the company owes its own vendors and suppliers, the same idea from the other side of the transaction.
Both exist because of accrual accounting: a sale gets recorded as receivable the moment it's invoiced, not when the cash actually arrives, and a bill becomes payable the moment it's received, not when it's paid. The gap between when revenue is earned and when cash actually shows up is exactly what receivables measure.
A company with fast-growing revenue but slow-paying customers can look profitable on paper while quietly running low on cash, since the revenue is real but the cash isn't in the bank yet. Keeping both reconciled and current, rather than letting either pile up unreviewed, is basic bookkeeping hygiene that becomes very visible the moment outside diligence starts.
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