What Is Accounts Payable (AP)? Definition & Example

Accounts payable (AP) is the total money your business owes to vendors and suppliers for goods or services you've received but haven't paid for yet.

AP is a current liability on your balance sheet — a short-term debt. When a vendor sends you an invoice with terms like 'Net 30,' that bill sits in accounts payable until you pay it. Managing AP well means paying on time (to protect vendor relationships and avoid late fees) without paying early and starving your cash.

The cash-flow lever: AP is one side of your working-capital equation. Stretching payment terms responsibly keeps cash in your business longer; paying erratically damages vendor trust and can cost you favorable terms. Good bookkeeping keeps a clean AP aging report so you always know what's due and when.

Its mirror image is accounts receivable — money others owe you. Together, AP and AR are the two numbers that most directly drive whether you have cash when you need it.

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Accounts Payable FAQ

What is accounts payable?

Accounts payable (AP) is the money your business owes to vendors and suppliers for goods or services already received but not yet paid for. It appears as a current liability on your balance sheet.

Is accounts payable an asset or a liability?

A liability. Accounts payable is money you owe, so it's a current liability on the balance sheet. Its opposite, accounts receivable (money owed to you), is a current asset.

Part of the Tides Bookkeeping Glossary — and the complete guide to small business bookkeeping.

What Is Accounts Payable?

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Accounts Payable FAQ