Accounts Payable (AP)
An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities.
Accounts payable are often referred to as "payables".
Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors. Investopedia Says:
Accounts payable are debts that must be paid off within a given period of time in order to avoid default. For example, at the corporate level, AP refers to short-term debt payments to suppliers and banks.
Payables are not limited to corporations. At the household level, people are also subject to bill payment for goods or services provided to them by creditors. For example, the phone company, the gas company and the cable company are types of creditors. Each one of these creditors provide a service first and then bills the customer after the fact. The payable is essentially a short-term IOU from a customer to the creditor.
Each demands payment for goods or services rendered and must be paid accordingly. If people or companies don't pay their bills, they are considered to be in default. Related Terms:
Accounts Receivable - AR
Balance Sheet
Charge Off
Creditor
Current Liabilities
Default
Liability
Other Current Liabilities
Receivables Turnover Ratio |