Accounts payable, often abbreviated as AP, refers to the money a business owes to its suppliers for goods or services that have been received but not yet paid for. It's essentially a company's short-term debt to vendors.  Think of it like a credit card you use for your business.

Here's an example to illustrate:

Imagine you run a bakery. You order $1,000 worth of flour from a supplier with a net 30 day payment term. This means you have 30 days to pay for the flour after you receive it. The $1,000 you owe becomes part of your accounts payable balance.

Here are some other common examples of accounts payable:

  • Office supplies purchased on credit
  • Rent for your business premises
  • Utility bills
  • Marketing services received

Accounts payable are recorded on the balance sheet of a business as a current liability. An efficient accounts payable process ensures timely payments to vendors, maintaining good relationships and potentially even qualifying for early payment discounts.