Accounts Receivable and Accounts Payable in Sage 50

Accounts Receivable & Accounts Payable in Sage

In order to have a smooth-running business, you must offer equal importance to both Accounts payable and Accounts Receivable. However, the key to doing so successfully is to make sure you offer separate and individual attention to both of these. Once you are able to have appropriate control over each of these, you can maintain a stable business and also enjoy growing opportunities. So, what are Accounts Receivable and Accounts Payable in Sage 50? Let us take a closer look at each of these.

The Accounts Payable

Also known as AP, the Accounts payable is a General Ledger account setting within the current liabilities section of a company’s balance sheet. Within this account, one can find the company’s latest obligations that they need to pay to the creditors and the suppliers. So, speaking, this is the money that you owe to the other third parties. Simply put, the current liabilities are the amount due to creditors within 1 year. 

The main role of the Accounts Payable department is to offer administrative and financial support to the business and to manage all the invoices that are received. This involves approving, processing, payment, and reconciliation of the creditor invoices. In order to maintain well-managed accounts payable, the department streamlines the process of payment and saves the business a ton of time and money. All the outgoing cash is controlled by the concerned team by deciding who pays the invoices. This is to capitalize on early payment discounts in order to avoid late fees and also on ‘How’ to pay the specific ‘fee’; either through check or electronically.

The Accounts Receivable

Also known as AR, this is the General Ledger accounts setting within the current assets section of the company’s balance sheet. Here, the balance implies the outstanding sales invoice that has been issued by the company to the customers. This is considered to be an asset as the company has extended lines of credit over to the customers. These credit lines can be expected to be received within the collection terms which usually falls within 30 or 60 days. You need to know that the current asset can be converted to cash within a span of 12 months. 

This is managed by the Accounts receivable department, where the entire process comprises invoice creation, and money collection and also includes the following up of late paying customers involving overdue invoices and requesting immediate payments. The entire process aims to collect the money as swiftly as possible, freeing up the cash flow for future use in the business. 

Here you need to know that the list of Accounts receivable invoices is categorized as an ‘aged debtors’ report. This is done in order to better analyze the amount according to the number of days that have passed the due date. This is also called the provision for doubtful debts, which is a journal entry that has been posted by the accountants to be able to estimate a certain amount of the balance that cannot be collected. This is the provision that offsets the accounts receivable account balance. 

It is important to record the doubtful debts provision as you can account for the influence of the previous bad debts, in case you have waited for a couple of months to find out which invoices are uncollectible.

Read More-: Setting Up Accounts Payable in Sage 50

What is Common Between the Accounts Receivable and the Accounts Payable

In the case of every business transaction, the invoice raised can be both payable to one party and receivable to a different party. 

For this, the accurate reporting of the accounts payable and the receivable is important for all businesses with the help of the Accrual accounting method. This is when the transactions are recorded in the form of the revenue and the expenses within the income statement during the time the transaction occurs. The best part is that you do not have to wait until the cash has been received or paid as in the cash accounting method. 

Hence it is important that both the Accounts payable and the Accounts receivable have been updated regularly. This is done in order to make sure that the income statement is an actual reflection of the money that has been earned and that has been spent by your business or organization.

The Differences Between the Accounts Receivable and Accounts Payable

The main difference to your business is that the Accounts payable balance is the money that is owed by your business and the Accounts receivable is the money it is owed. 

In terms of business structuring, both functions need to be separated for internal control purposes. This also helps in the reduction of cases and chances of fraud. Hence, it is much required to have a dedicated department or personnel for each. This implies that the users that are responsible for raising invoices should not have the authority to pay them.

How to Record Both the Sets of Accounts

A journal entry is recorded within the Accounting System and the expense is posted to the General Ledger when the accounts payable department or the individual receives a supplier invoice. Likewise, the unpaid amount is added to the Accounts payable balance which can be cleared once the payment has been made out of the business bank Account. 

Once the sales have been made, a journal entry is recorded by the accounts receivable department in order to account for the income. This amount is added to the accounts receivable departments and is recorded as a journal entry to the account for income once the sales are made. Thus, a sales invoice is created and sent over to the customer, usually electronically. This comprises the detailed amount that needs to be paid and also the collected terms. 

Once this has been deposited into the business bank account, the receipt to the relevant invoice is matched by the AR personnel. This way the invoice is marked as paid and a journal entry is recorded in order to clear the accounts receivable account balance. 

With the better optimization of these processes, the business can maintain a smooth healthy cash flow. This way you have a steady stream of cash flow. Hence you can also have a steady stream of incoming cash in order to cover your everyday expenses. So, in order to better streamline both functions, you need to be able to create a step-by-step process so that the teams can follow them easily. The main aim is to ensure that invoices do not get misplaced or are not sent to the wrong people. This helps in being able to reduce the occurrence of inaccurate information about them. 

Note: It is now possible to automate all of your accounts receivable processes with the help of Cloud Accounting software as well. This way the invoice is raised and sent to you. Also, human error and manual data can be removed. Likewise, the Collection process is also supported by the Accounting software by being able to automatically send emails to the customers regarding past-due invoices. Not just that, but you are also in the position to be able to negotiate favorable payment terms with your suppliers, hence allowing you to free up more cash.

The Examples of the Receivable and Payable Accounts

Usually, the materials, equipment, transport, energy, and services like subcontracting are included within the Accounts Payable in the General Ledger. However, it does not include the other types of current liabilities like accruals, payroll, taxes, or any short-term aspects of the debt that have been recorded separately. 

The Accounts Receivables comprise all the invoices that are sent to the customers or clients for those items that are sold or the services that are performed for them on credit. However, this does not comprise any current assets like inventory, cash, or any other prepaid expenses.

The Accounts Receivable Turnover Ratio

This is also known as the receivable turnover or the debt turnover ratio. Here, this is the measure of how efficiently and quickly the Accounts Receivable is converted into cash within a certain accounting period by a company. The formula for the AR turnover rate for a one-year period looks like this:

[Net annual credit sales/average accounts receivables = Accounts receivables turnover]

Current Ratio:

This is also called working capital and is a measure of liquidity — whether your company is able to pay short-term obligations with available cash or other liquid assets that can be converted into cash within a year.

[Working capital ratio = current assets/current liabilities]

Days Sales Outstanding (DSO):

This displays how long, on average, it takes for a customer to be able to pay your company for goods and services

[Days sales outstanding = accounts receivable for a given period/total credit sales X number of days in the period]

Also Read-: How to Setup Linked Accounts in Sage 50

Accounts Receivable Vs Accounts Payable

Accounts Receivable Accounts Payable
    Money to be received
    Money to be disbursed
    Rerorded as a current asset on the balance shee
    Recorded as a current liability on the balance sheet
    Vendor’s record
    Client’s record
    Recognized as income unless written off
    Recognized as a liability until paid


These are the main aspects, pointers, similarities, and differences between the Accounts Receivable and Accounts Payable in Sage 50. However, if you still have doubts about the same, you can visit our website at

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Frequently Asked Questions(FAQs)

What is meant by Accounts Payable in Sage 50?

The Account Payable in Sage comprises the detailed transactions and other details of the purchases you make. The Accounts payable forms are documents that can be filled out and sent over to the vendors. These include Checks and purchase orders.

What is the main Function of the Sage 50 Accounts Receivable?

The main function of the Accounts Receivable is to maintain a record of how much payment has been done by each customer in a year till date, credit terms, and credit limits for the customer. Also, it comprises the amount of current and previous bills and other such details regarding the customer.

Who has to Pay the Accounts Receivable?

The customer has to pay the Accounts Receivable as AR is the proceeds or the payments that the company receives from the customers for the goods and services purchased by them on credit. The credit period is short and ranges from a couple of days to months or it can also stretch to a year in some cases.

Where do you Send the Invoice? AP or AR?

AR is the outstanding invoices for the business or what the customers owe you. As for the AP, this is the outstanding bills that your business has or the money that you owe to the others.

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