What is Accounts Payable?
An Accounts payable is the money owed by a business to its vendors. Whenever a business receives goods or services on credit, the debt is recorded under the accounts payable section of the company’s ledger. This account is important in that it helps you to keep track of your short-term debts and when it’s due. Generally, accounts payable appear as business liabilities in a balance sheet and are expected to be paid back within a fixed time.
Accounts Payable – Example
For example, your company invited an electrician to fix a faulty outlet. He charged you $150 for the service but you did not pay immediately. The electrician agreed you could pay at the end of the month. That amount and its due date must be recorded as ‘accounts payable’ in the ledger.
