Accounts Payable
Definition
Accounts Payable (A/P) is money the business owes to vendors or suppliers for goods or services it has already received but not yet paid for. It is a liability on the Balance Sheet.
Example
Northstar Creative receives a $450 bill for design software. The software was used this month, but the bill is due next month. The $450 is recorded as an expense and also as Accounts Payable until it is paid.
Why It Matters
A/P tells the bookkeeper how much the business owes and to whom. Tracking it correctly prevents paying bills twice or missing due dates.