Rancakmedia.com – Many are still confused and don't recognize the difference between Debt and Receivable, you don't need to worry because in this article, we will provide an explanation of the difference between Payable and Receivable along with examples.
In the world of finance, the terms debt and receivables are certainly heard a lot. But you need to know that the two words have different meanings.
You need to understand the difference between accounts payable and receivable, especially if you are an entrepreneur. In short, debt is loan, and receivables are loans.
Know the Difference between Debt and Accounts Receivable
But in detail, debt is a form of credit or loan funds, both cash and securities to meet needs.
It can also be said that debt is money that you borrow from other people. Loans or debts must be repaid within the agreed timeframe. The amount of debt depends on the needs of individuals or companies.
Receivables are the provision of credit or loans in cash or non-cash credit to individuals and companies. In general, receivables are generated because someone is unable to pay off transactions on time.
In another sense, accounts receivable is a term for money that you lend to other people.
To find out more, here are the 5 differences, as follows:
- Payables are cash that must be paid to creditors to purchase raw materials or services. Receivables are cash received for sales made on credit.
- Accounts payable is the amount the company owes to suppliers. Receivables are amounts owed by the company's customers.
- Payables arising from the purchase of materials on credit. Receivables are made for the sale of goods and services.
- Debt reduces cash flow. Receivables lead to an increase in cash flow
- Payables are recorded as liabilities. Receivables are considered as assets.
Examples of Debt and Accounts Receivable Cases
To make it easier for you to understand, you can follow the following cases, namely:
For example, in terms of debt, photocopying & printing businesses need funds to increase operational efficiency and speed.
Therefore, additional copiers, printers and scanners are needed to complete the printing process quickly. Business owners end up borrowing or owing money to the bank.
The type of debt taken is business credit with an annual interest rate of 5%. Then the bank will provide a capital loan that is guaranteed by the motorcycle owner's certificate.
In general, the debt will be recorded on the balance sheet, and then the report will also indicate the purpose of borrowing money.
As for the example of the case of receivables, an electronics company received a payment of 160 million after three months.
Until the due date, the photocopying & printing business still keeps the payment money. The 160 million fund is called the company's receivables.
Below we have summarized some frequently asked questions about the difference between debt and receivables, as follows:
When Do Receivables Happen?
Receivables arise due to the sale of goods and services or due to the provision of credit to debtors whose payments are made in installments or not in cash (credit) provided by the company and can cause collectible receivables and the company must have various bad customers.
Thus the article about Recognizing the Difference between Debt and Receivables and Examples, after reading the article above, can you now distinguish between Debt and Receivables?
We hope that the article above can be helpful and useful for those of you who don't know the difference between debt and accounts receivable.