Accounts Payable (AP)
Also known as: AP, A/P, Payables
Accounts payable is money your business owes suppliers and vendors for goods or services already received but not yet paid for.
What it actually means
Payables are the mirror image of receivables: bills you have incurred and not yet settled. They sit as a liability on the balance sheet, and on an accrual basis the expense is recorded when the bill arrives rather than when you pay it. Managing payables is a timing exercise — paying too early drains cash you may need, paying too late costs late fees and vendor goodwill, and losing a bill entirely means the expense is missing from your books and your profit looks better than it was. A clean payables list is also the fastest way to see committed spending that has not hit the bank yet.
A $2,200 supply order delivered in June and paid in July is a June expense and a June payable.
Supplier invoices that live in an inbox instead of the books make a month look more profitable than it was. Recording payables as they arrive means the P&L reflects what you have actually committed to, not just what has cleared.
Related terms
Accounts receivable is money customers owe you for work already delivered but not yet paid for.
A cash flow statement tracks the actual money moving in and out of your business over a period, separate from profit on paper.
A balance sheet is a snapshot of what your business owns, what it owes, and what is left over for the owners on a specific date.
Cash accounting records money when it moves; accrual accounting records it when it is earned or owed, regardless of when it is paid.
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