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Accounts Payable: Definition and Meaning
Definition
Accounts payable is money a business owes suppliers, vendors, subcontractors, or other creditors for goods or services it has already received but has not yet paid for.
Why It Matters
Accounts payable is a current liability and an important part of cash-flow management. A business needs to understand what it owes, when payments are due, whether vendor balances are accurate, and how payment timing affects relationships and working capital.
For contractors, accounts payable can include material purchases, subcontractor invoices, equipment costs, insurance, and other obligations. Timely processing and review of payables can help management avoid missed payments, duplicate payments, and inaccurate project-cost information.
Example
A supplier delivers materials and sends a $12,000 invoice payable in 30 days. Until the company pays it, the $12,000 is recorded as accounts payable.
Related Terms
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