Annual Accounts Query Definitions
Accounts receivable are invoices owed to you by customers. They’re sometimes called receivables, trade debtors, or AR. It might help to think of accounts receivable as a sales invoice that your customer hasn’t paid yet.
Let’s say you sell your product to a customer on credit and send them an invoice for the sale. The amount your customer owes you from that invoice is part of your accounts receivable. In your customer’s records, that invoice will be part of their accounts payable. In this way, accounts payable and accounts receivable are two sides of the same transaction.
Accounts receivable might also refer to a person or team in charge of receiving or chasing up payments owed to your business. Your ‘accounts receivable’ might want to talk to a customer who is overdue on their payment to you..
Accounts payable refers to the bills you need to pay. They’re sometimes called payables or AP.
It might help to think of accounts payable as a bill that your business hasn’t paid yet. You might owe a supplier for raw materials, for example. Or you may owe money for an unpaid electrical or phone bill.
Let’s say you buy some materials from a supplier on credit. They’ll send you an invoice for those materials. In your records, the amount on that invoice is part of your accounts payable. In your supplier’s records, that invoice will be part of their accounts receivable. In this way, accounts payable and accounts receivable are two sides of the same transaction.
Accounts payable might also refer to the person or team who processes invoices and pays your bills. A supplier who hasn’t yet received payment for the goods they’ve provided might want to talk to ‘accounts payable’.
A contingent liability is a potential liability. It depends on a future event occurring or not occurring.
For example, if a parent guarantees a child’s first car loan, the parent has a contingent liability. If the child makes their car payments and pays off the loan, the parent will have no liability. If the child fails to make the payments, the parent will have a liability to the finance company.
Outstanding lawsuits and product warranties are common examples of contingent liabilities because each outcome is uncertain.
If a contingent liability is only possible (not probable), or if the amount cannot be estimated, then a disclosure note is required.