Accounts Payable

Accounts Payable (Definition)

Accounts payable (AP) refers to the amount of money a company owes to its creditors or suppliers for goods or services purchased on credit. It is a current liability on a companys balance sheet.

Key aspects of accounts payable include:

1. Represents short-term debt obligations
2. Usually paid within a specific timeframe (e.g., 30, 60, or 90 days)
3. Impacts a companys cash flow and working capital 4. Requires careful management to maintain good supplier relationships
4. Can be used to calculate important financial ratios 6. Often managed through an accounts payable process, which may include invoice approval and payment scheduling Effective management of accounts payable is crucial for maintaining a companys financial health and creditworthiness.