Let's assume that Company A sells merchandise to Company B on credit. (Perhaps the invoice states that the amount is due in 30 days.) Company A will record a sale and will also record an account receivable. Company B will record the purchase (perhaps as inventory) and will also record an account payable.
Our example reminds me of an old saying, "There are two sides to every transaction." In accounting we also expect symmetry: Company A has a sale and a receivable, Company B has a purchase and a payable.
Gain unlimited access to our bookkeeping seminar videos, bookkeeping proficiency exams (and answers), bookkeeping cheat sheet, visual tutorials, and more—all designed to help you master valuable bookkeeping skills. Learn more about AccountingCoach PRO.