Sure, here's a concise breakdown:

  1. Definition: A payable in accounting refers to an amount owed by a business to its suppliers, vendors, or creditors for goods or services received but not yet paid for.
  2. Types: Payables can include various types such as accounts payable (short-term obligations), notes payable (longer-term obligations usually involving a written promissory note), and accrued expenses (expenses incurred but not yet paid).
  3. Recording: Payables are recorded as liabilities on the balance sheet, representing the company's obligations to third parties. They are typically classified as current liabilities if they are due within one year, and non-current liabilities if the payment is due after one year.
  4. Importance: Monitoring payables is crucial for managing cash flow and maintaining good relationships with suppliers. Timely payment helps ensure continuity of supply and may allow for negotiation of favorable credit terms.
  5. Accounting Entries: When goods or services are received, a corresponding accounts payable entry is made, recognizing the liability. When payment is made, the accounts payable is decreased, and the cash account is decreased by the same amount.
  6. Accrual Basis: Businesses using the accrual basis of accounting record payables when expenses are incurred, regardless of when cash changes hands. This provides a more accurate picture of a company's financial position and performance.

Understanding payables is fundamental for financial management and reporting, as they represent obligations that must be fulfilled by the business.