ACCOUNT PAYABLE

Accounts payable (AP) is an account within the general ledger that represents a company's obligation to
pay off a short-term debt to its creditors or suppliers. Another common usage of "AP" refers to the
business department or division that is responsible for making payments owed by the company to
suppliers and other creditors.

CORPORATE FINANCE & ACCOUNTING FINANCIAL STATEMENTS

Accounts Payable (AP)

By ALICIA TUOVILA

Updated Sep 24, 2019

What is Accounts Payable (AP)?

Accounts payable (AP) is an account within the general ledger that represents a company's obligation to
pay off a short-term debt to its creditors or suppliers. Another common usage of "AP" refers to the
business department or division that is responsible for making payments owed by the company to
suppliers and other creditors.

KEY TAKEAWAYS

Accounts payable are amounts due to vendors or suppliers for goods or services received that have not
yet been paid for.

The sum of all outstanding amounts owed to vendors is shown as the accounts payable balance on the
company's balance sheet.

The increase or decrease in total AP from the prior period appears on the cash flow statement.

Management may choose to pay its outstanding bills as close to their due dates as possible in order to
improve cash flow.

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Accounts Payable

Understanding Accounts Payable (AP)

A company's total accounts payable (AP) balance at a specific point in time will appear on its balance
sheet under the current liabilities section. Accounts payable are debts that must be paid off within a
given period to avoid default. At the corporate level, AP refers to short-term debt payments due to
suppliers. The payable is essentially a short-term IOU from one business to another business or entity.
The other party would record the transaction as an increase to its accounts receivable in the same
amount.