Accounts Payable (A/P)

Accounts Payable (A/P) is the balance-sheet liability tracking money a company owes vendors for goods or services received but not yet paid for. It's recorded as a current liability because the company has an obligation to pay, with payment timing managed strategically to balance cash flow against vendor relationships. A/P is the mirror image of A/R: where A/R is what customers owe the company, A/P is what the company owes others.

The basic mechanics:

Company receives an invoice from a software vendor for $10K with Net-30 terms. On the day of receipt:

• Income statement: $10K expense (recognized in the period the service was delivered).
• Balance sheet: A/P +$10K (liability).
• Cash: no change yet.

30 days later, company ...