Definition of Accounts Payable

What does the term "accounts payable" mean? What is meant by the term "accounts payable"?

"Accounts payable" represents the money that a company owes to its creditors. "Accounts payable" are short-term debts that creditors are expecting to receive in a relatively short period of time (usually 30 days).

An example of an accounts payable? A plumbing company performs $1,700 worth of work for a real estate firm. The plumbing company sends an invoice to the real estate firm - the plumbing company works on a "net 30" policy, which means that their customers have 30 days to pay before interest starts being added.

In this case, the plumbing company is extending short-term credit to the real estate firm, as the work has been performed for the real estate firm but the money has not yet been paid.

The opposite of accounts payable? Accounts receivable, which is money that is OWED to a company.

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