Define: Accounts Payable

UK Accounting Glossary

Definition: Accounts Payable


Quick Summary of Accounts Payable


Amounts due for payment to suppliers of goods or services, also described as trade creditors.



What is the dictionary definition of Accounts Payable?

Dictionary Definition


Accounts payable is money owed by a business to its suppliers shown as a liability on a company’s balance sheet.


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Full Definition of Accounts Payable


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.


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Examples of Accounts Payable in a sentence


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.



Cite Term


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https://payrollheaven.com/define/accounts-payable/
Modern Language Association (MLA):
Accounts Payable. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. February 24, 2020 https://payrollheaven.com/define/accounts-payable/.
Chicago Manual of Style (CMS):
Accounts Payable. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/accounts-payable/ (accessed: February 24, 2020).
American Psychological Association (APA):
Accounts Payable. PayrollHeaven.com. Retrieved February 24, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/accounts-payable/

Definition Sources


Definitions for Accounts Payable are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 18th December 2018.