What Is Accounts Payable?
Definition, journal entries, and how it differs from accrued expenses.
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Quick answerAccounts payable is money a business owes to suppliers for goods or services bought on credit. It is a current liability.
| Also called | Trade payables, creditors |
|---|---|
| Normal balance | Credit |
| Opposite | Accounts receivable |
Accounts payable in plain English
When a supplier delivers goods and gives you time to pay, you owe them money. That unpaid supplier invoice sits in accounts payable until you settle it.
Worked example
A business buys inventory for 3,000 on credit.
| Account | Debit | Credit |
|---|---|---|
| Inventory | 3,000 | |
| Accounts payable | 3,000 |
When the supplier is paid, debit Accounts payable 3,000 and credit Cash 3,000.
Common mistakes
- Calling accounts payable an expense. It is a liability. The expense is recorded separately.
- Missing supplier invoices at period end, which understates liabilities.
Frequently asked questions
What is the difference between accounts payable and accrued expenses?
Accounts payable relates to invoices received from suppliers. Accrued expenses are costs incurred but not yet invoiced.
Is accounts payable an asset or a liability?
A liability, usually current.
What is the difference between accounts payable and accounts receivable?
Payable is what you owe. Receivable is what you are owed.
Keep learning
This page is for general learning. Accounting rules vary by country and standard.