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What are Accounts Payable?
Home » Accounting » Accounts Payable » What are Accounts Payable?Any unpaid bill is listed under Accounts Payable, which is sometimes abbreviated as A/P. When a business orders office or manufacturing supplies, takes delivery of a fleet of delivery trucks or orders pizza for a lunch meeting, the amount due for the items purchased will be listed under accounts payable because this is an amount that is owed to the supplying vendor.
Any money owed as an account payable is a current liability, rather than a current asset, but the value of the item(s) purchased are listed as current assets on the company balance sheet. The money owed must be repaid within a prescribed amount of time to avoid late penalties or fees, as well as to avoid being in default. To give purchasers an incentive to pay quickly, many businesses offer a discount for paying within 10 days of the invoice date. Paying the amount due within this window of time is beneficial for both buyer and seller. It benefits the seller because the amount due is paid quickly, and the purchaser benefits from the lower cost of the goods.
Any singular transaction or purchase is an account payable, but the process of tracking all the accounts payable for a business is also called “Accounts Payable.” Larger companies usually have a division of the accounting department dedicated to verifying, tracking, and paying all accounts payable. The Accounts Payable Department is assigned the task of paying amounts owed in a timely manner so that the business remains on a sound financial footing.
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