Accounts payable are defined as a liability to a creditor. It can be carried on an open account, which is typically used for the purchase of goods and services. When a company opts to buy goods and services on credit, it is called an account. You might know it by the name of credit. Whoever is supplying the goods and services in question is the creditor. If a promissory note is not signed by both parties, the transaction is recorded in a liability account. This is accounts payable.
Accounts Payable Must Have a Credit Balance
Since accounts payable is a liability account, accounts payable has a credit balance. When an invoice for a vendor is recorded, accounts payable is credited. Of course, the other account must be debited. When accounts payable are fully paid, cash is credited, and accounts payable are debited. The accounts payable credit balance is supposed to equal the number of outstanding invoices.
Accounts Payable Can Be An Employee or Staff
The accrual method of accounting requires that the company receiving the goods and services in question report them on the same day they are received. The same date is used to enter a debit entry to an asset account or expense. The term “accounts payable” is not limited to a liability to a creditor or an open account used for purchasing goods and services. Accounts payable can also be defined as the person or staff members responsible for paying the company’s bills and processing vendor invoices. Suppliers who have not received a payment will want to speak with the accounts payable staff.
Documents Where Details Need To Be Reviewed
To ensure that only legit and accurate amounts are recorded, the accounts payable must be reviewed in detail. The following documents are where details need to be reviewed:
- Purchase orders that are issued by the company
- Receiving reports that are issued by the vendors
- Contracts and other important legal agreements
- Invoices from the vendors of the company
Accounts Payable Service Plays a Vital Role
The financial statements of any company are held in the hands of the accounts payable staff. For accounts payable to run smoothly, several key steps must be taken.
The invoices of vendors need to be verified accurately and in a timely fashion. This is important for several reasons. Accounts payable needs to always run smoothly.
Accurate recording of all forms of information needs to be a priority. If accounts payable are even slightly off, a company could face significant problems.
Accounts payable develops a relationship with suppliers that needs to be kept on good terms. This can be achieved by processing, recording, and verifying information as quickly as possible.
All in all, accounts payable is a crucial aspect of any company that purchases goods and services from vendors.
Last updated: September 2025