Understanding Accounts Payable: What You Need to Know

A/P stands for Accounts Payable. It refers to the amount of money that a business owes to its suppliers or creditors for goods or services that have been purchased on credit. In other words, it is the amount of money that the business needs to pay to its suppliers in order to settle its outstanding debts.

For example, if a company purchases inventory from a supplier on credit and does not pay for it immediately, the amount owed to the supplier becomes an accounts payable. The company will then need to pay for the inventory at a later date, usually within a specified time period such as 30 or 60 days.

Accounts payable are considered a current liability because they are typically paid within a short period of time, such as within a month or two. By keeping track of accounts payable, businesses can better manage their cash flow and ensure that they have enough money to pay their suppliers on time.