UK Accounting Glossary
Amounts due for payment to suppliers of goods or services, also described as trade creditors.
Accounts payable is money owed by a business to its suppliers shown as a liability on a company’s balance sheet.
Accounts payable is money owed to suppliers who have sent your business goods, or supplied it with services, who you haven’t yet paid. These are also known as trade creditors.
Accounts payable are obligations due to trade creditors. Let’s say a company buys widgets for its inventory for $50. The inventory (or similarly named) account increases by $50 and the accounts payable account increases by $50. When the creditor is paid, the cash account decreases by $50 and accounts payable decreases by $50, eliminating the accounts payable for this obligation. Since a company continually incurs new debts, however, new accounts payable are continually created. The balance in the accounts payable account is listed at or near the top of the current (or short-term) liabilities section of the balance sheet, because it is among the most immediate cash obligations of the firm. All other factors held equal, investors should be suspicious of a substantial rise in accounts payable, as well as rising accounts payable vis-a-vis inventories. As a rule of thumb, a current ratio (current assets/current liabilities) of 1.5 or 2 to 1 indicates a company that has sufficient funds to pay its accounts payable on a timely basis.
Long term accounts payable shall be accounted at actual amounts.
All the accounts payable balances were aged within 90 days.
The invoice states that this shipment will be billed through Accounts Payable and that the bill is due in thirty days.
Once the accounting department enters this bill into the system, it will show up in the accounts payable column until it is paid.
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Definitions for Accounts Payable are sourced/syndicated and enhanced from:
This glossary post was last updated: 18th December 2018.