13 Accounts payable and accounts receivable vocabulary

Managing money owed to and by a company.

accounts payable (AP) – the money a company owes because it purchased goods or services on credit from suppliers.

accounts receivable (AR) – amounts a company has a right to collect because it sold goods or services on credit to a customer.

invoice – a document that itemizes and records a transaction between a buyer and a seller.

credit terms – conditions under which a seller will extend credit to a buyer.

aging report (US), ageing report (UK) – a summary of accounts receivable broken down by customer and date range of the invoice.

bad debt – an amount owed to a creditor that is unlikely to be paid.

write-off – a reduction in the recognized value of an asset.

early payment discount – a discount offered to customers as an incentive to pay their bills early.

collection agency – a company used by lenders to recover funds that are past due or accounts that are in default.

trade credit – an agreement where a customer can purchase goods on account without paying cash up front.

credit limit – the maximum amount of credit that a financial institution extends to a client.