Financial Glossary
Accounts Payable (AP)
What is Accounts Payable?
Accounts Payable (AP) refers to the money a business owes to suppliers for goods or services received on credit. It is recorded as a liability on the balance sheet and must be paid within a specific timeframe to maintain good vendor relationships and cash flow.
How Does Accounts Payable Work?
- A business receives an invoice from a supplier for goods or services.
- The invoice is recorded in the AP ledger as a liability.
- Payment is made before the due date to avoid late fees.
Why is Accounts Payable Important?
- Maintains good supplier relationships by ensuring timely payments.
- Improves cash flow by managing short-term liabilities.
- Helps track business expenses for financial reporting.
📌 Related: Accounts Receivable (AR) | Balance Sheet
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