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Accounts Payable (AP)

Accounts payable (AP) is the term used to describe the money a business owes its suppliers or vendors for products or services received. A company’s total accounts payable balance for a specific time period can be found on the balance sheet under the current liabilities. Accounts payable can also be viewed as a company’s obligations that must be paid within a specific time frame to avoid default. In contrast, the vendor or supplier in this scenario would record this transaction as an accounts receivable on their own balance sheet. The increase or decrease in accounts payable will then be shown on the cash flow statement from the previous period.

The accounts payable is an essential item that all companies must pay close attention to. If this number increases over time, that means the company is purchasing a large number of goods or services on credit. In reverse, if a company is seeing a decrease in their accounts payable, that means they are paying prior obligations faster than they are making new purchases. This could mean that there is a problem with cash flow and/or liquidity. It may also indicate that the company has too much inventory on hand.

When looking at a company’s accounts payable, it is important to understand how long the company will take to pay back these debts. For example, if a company takes 30 days to pay back a $10,000 debt, then it is better to consider this debt as being due in one month. However, if a company pays back a $10,00 debt in 10 days, then it should be considered as being due in ten days. The longer the payment schedule, the more likely the company will have trouble meeting its financial obligations. That’s why a company must make timely payments or at least have a plan in place on how they will pay off their outstanding amounts.

Examples of accounts payable include:

Accounts payable to employees – This includes salaries and wages owed to employees.

Accounts payable to contractors – This includes invoices from outside companies hired by the company.

Accounts payable for inventory – This includes items purchased but not yet sold.

Accounts payable with banks – This includes any loans made to the company.

Account payable with suppliers – This includes any goods or services provided to the company.

Account payable with customers – This includes any payments due to the company from customers.

Account payable with other parties – This includes any debts owed to third-party entities such as landlords, utilities, etc.

What is the difference between accounts payable and accounts receivable?

An accounts payable is a liability that represents the amount of debt a company has incurred to purchase goods or services. On the other hand, an accounts receivable is a type of asset that represents the amount of money a company has collected from its customers in a period of time. An example of an accounts receivable is when a customer pays a bill for a product or service they have already received. The company then records the payment as an asset on its balance sheet.

How do I calculate my accounts payable?

To find your accounts payable, you need to add up all of the amounts listed on your balance sheet under current liabilities. You should only count those amounts that represent money that you owe to others. For instance, if you bought $5,000 worth of computers and then sold them for $10,000, you would still owe the computer seller $5,000 even though you’ve already been paid back. However, if you bought $1,000 worth and then sold it for $2,500, you would only owe the seller $1,000 because you’ve already been paid off.

To find out how much cash you currently have available to spend, subtract your accounts payable from your total assets.

How to record accounts payable transactions?

Once you have identified which type of accounts payable transaction you need to record and its payment terms, it is important to know how to properly record these types of transactions. The first step is to identify what type of accounts payable transaction it is. For example, if you are recording a payment to your employee, then you will want to enter the amount into the appropriate line on the general ledger. Once you have recorded the transaction or original invoice, you will want to make sure that you have entered the correct date. You may find that some of your accounts payable transactions do not have dates associated with them. In this case, you will want to use the “date” field to enter the date when the transaction was completed.

Once you have recorded the transaction correctly, you will want to assign a code to each entry so that you can easily track the information later. To help you keep track of your accounts payable transactions, you should create a journal entry for each one. Each journal entry will contain the following details:

Date – The date that the transaction occurred.

Description – A description of the transaction.

Type – The type of transaction that took place.

Amount – The dollar value of the transaction.

Account – The name of the account where the funds were deposited.

Class – The class of the transaction.

Code – A unique identifier for the transaction. This number will be used to reference the transaction later.

When you have created enough entries to cover all of your accounts payable transactions for a given month, you should review the entries to ensure that they are accurate. If any of the entries are incorrect, you should change them before continuing.

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