What is Accounts payable (A/P)?

Accounts payable, usually shortened to A/P, is the total a business owes to suppliers on credit. When a supplier delivers stock or a service and sends a bill with terms such as net 30, the business records the bill as an expense or inventory and a matching liability in A/P. Nothing leaves the bank yet. When the bill is paid, the liability is cleared and cash goes down. A/P sits in the current liabilities section of the balance sheet.

A clean payables process has three checks. The purchase order says what was ordered, the receiving record says what actually arrived, and the bill says what the supplier is charging. Matching all three before paying (a three-way match) catches short shipments, price changes and duplicate invoices. The A/P aging report then groups unpaid bills by how long they have been outstanding, so you can see what is due this week and what is already late.

Managing A/P well is a cash-flow decision. Paying on the due date rather than the day a bill arrives keeps cash in the business longer, while taking early-payment discounts can be worth more than the interest you would earn holding the money. In Canada, the GST/HST shown on supplier bills is also where most input tax credits come from, so recording bills accurately matters at sales tax filing time too.