What is Accounts Payable? Definition of Accounts Payable, Accounts Payable Meaning - The Economic Times (2024)

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What is Accounts Payable? Definition of Accounts Payable, Accounts Payable Meaning - The Economic Times? ›

Accounts Payable. When a company purchases goods on credit which needs to be paid back in a short period of time, it is known as Accounts Payable. It is treated as a liability and comes under the head 'current liabilities'. Accounts Payable is a short-term debt payment which needs to be paid to avoid default.

Accounts payable (AP) are amounts due to vendors or suppliers for goods or services received that have not yet been paid for. The sum of all outstanding amounts owed to vendors is shown as the accounts payable balance on the company's balance sheet.

"On account" is an accounting term that denotes partial payment of an amount owed. On account is also used to denote the purchase/sale of goods or services on credit. On account can also be referred to as “on credit.”

Accounts payable (AP) is a short-term debt and a liability on a balance sheet where a business owes money to its vendors/suppliers that have provided the business with goods or services on credit.

According to Generally Accepted Accounting Principles (GAAP), accounts payable are supposed to be current liabilities, i.e. liabilities that you plan to pay back within a year.

An accounts payable (AP) entry indicates a company's obligation to pay off debts to its suppliers or creditors within a given period in order to avoid default. Your accounting balance sheet is replete with important lines and sub-categories. Arguably none holds as much weight as the Accounts Payable (AP) section.

Accounts payable is also commonly known as trade payables or bills to pay.

A debit balance in a payable account means that the company owes money, while a credit balance indicates that the company is owed money. Therefore, the normal balance of Accounts Payable is negative. A company's Accounts Payable include any outstanding bills that need to be paid shortly.

The Accounts Payable (AP) department is a cornerstone of any organization's financial well-being, responsible for key objectives like timely vendor payments, accurate data maintenance, and fostering positive supplier relationships.

A high accounts payable ratio signals that a company is paying its creditors and suppliers quickly, while a low ratio suggests the business is slower in paying its bills.

What is the main role of accounts payable? ›

What is Accounts Payable? The Accounts Payable department is responsible for the financial, administrative and clerical support of a company. They are in charge of making payments owed by the company to suppliers and other creditors, paying vendor invoices or bills, and recording the company's short-term debts.

Accounts Payable refers to a business's obligations to suppliers and creditors for purchases made on an open account. It specifically refers to any amounts owed expected to be paid within one year or less (usually due in 30 to 60 days).

A common accounts payable example includes the cost of buying raw materials. For business owners, this refers to the money your company owes for the materials you use to create your products. The exact type of raw materials that appear on your balance sheet may vary by your industry and even your business model.

Accounts payable (AP) is an accounting term used to describe the money owed to vendors or suppliers for goods or services purchased on credit.

The accounts payable (AP) process is responsible for paying suppliers and vendors for goods and services purchased by the company. AP departments typically handle incoming bills and invoices but may serve additional functions depending on the size and nature of the business.

Accounts payable (AP) defined

Accounts payable (AP) is an accounting term used to describe the money owed to vendors or suppliers for goods or services purchased on credit.

An Accounts Payable officer (AP officer) is responsible for several duties and tasks, such as: Processing of payments and financial transactions to suppliers and obtaining goods and services from suppliers promptly. Liaising with finance officers and suppliers concerning stock management, financial records and accounts.