Accounts payable is the money an entity owes to its suppliers for goods or services received but not yet paid for.
It’s a liability — the entity has an obligation to pay. On the balance sheet, accounts payable appears under current liabilities because these obligations typically come due within 30 to 90 days. Under accrual accounting, the expense is recorded when the goods or services are received, not when the entity writes the check. Accounts payable captures that timing difference.
Accounts payable is the mirror image of accounts receivable. What’s receivable from the seller’s perspective is payable from the buyer’s. The same transaction creates an asset on one company’s books and a liability on another’s. This symmetry is a natural consequence of accrual accounting — both parties record the economic event when it happens, then settle the cash separately.
Related terms
- Account — the general category that accounts payable belongs to.
- Accrual accounting — the method that creates the timing gap accounts payable represents.
- Accounts receivable — the mirror image: money owed to the entity by others.