Accounts payable

Accounts payable is a term used in accounting to refer to the company's obligation to pay off a short-term debt to its creditors or suppliers. It appears on the balance sheet under the heading current liabilities.

Definition

Accounts payable is the amount of money a company owes to its suppliers or a short-term lender. It represents a series of short-term IOUs from a company to other entities, and is used in managing all money that a company owes to vendors for products and services bought on credit.

Process

The accounts payable process might be carried out by an accounts payable department in a large corporation, by a small staff in a medium-sized company, or by a bookkeeper or perhaps the owner in a small business. The process involves reviewing a detailed list of the company's liabilities, and it usually includes examining the company's accounts payable, accrued expenses, and any other outstanding bills.

Importance

Accounts payable is important in financial management because it affects the cash flow of a company and the company's relationships with its suppliers. Efficiently managing accounts payable is a key to maintaining positive supplier relationships and can also provide important financial benefits.

See also

• Accounting
• Balance sheet
• Cash flow
• Financial management