What are Accounts Payable?

Accounts Payable are a liability incurred when companies purchase goods or services on credit from a vendor or supplier but haven’t yet paid for them.

When a company receives an invoice from a vendor or supplier, the invoice is recorded in the accounts payable ledger as a credit entry. Once the company makes the payment, the accounts payable balance is reduced by the corresponding amount, and the same amount decreases the cash balance.

Accounts Payable represent short-term debt that must be paid within a certain period.

Effective accounts payable management involves timely supplier payment while maintaining a sufficient cash balance to support ongoing business operations.

Proper accounts payable management can help improve cash flow, build good relationships with suppliers, and maintain a positive reputation in the business community.