Money a business owes to its suppliers or vendors for goods and services received but not yet paid for.
Accounts Payable represents current liabilities on a company's balance sheet. When a business purchases goods or services on credit, the amount owed is recorded as accounts payable. It is a key component of working capital management and cash flow planning. AP is typically managed through an aging schedule that tracks invoices by their due dates to ensure timely payments and avoid late fees.
A retail store orders ₹50,000 worth of inventory from a supplier on 30-day credit terms. Until the store pays, ₹50,000 appears as Accounts Payable on its balance sheet.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Accounts Payable is money you OWE to suppliers (a liability), while Accounts Receivable is money OWED TO you by customers (an asset). They are opposite sides of the same transaction.
Accounts Payable appears under Current Liabilities on the Balance Sheet. An increase in AP is shown as a source of cash in the Cash Flow Statement.
An increase in AP means you are holding cash longer (positive for cash flow). A decrease means you are paying suppliers faster (uses cash). Managing AP payment timing is a key cash flow strategy.
Money owed to a business by its customers for goods or services delivered but not yet paid for.
A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
The difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations.
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
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