ACCOUNTS PAYABLE Meaning and
Definition
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Accounts payable is a term commonly used in accounting to refer to the amount of money a company owes to its creditors or suppliers for goods and services that have been delivered but not yet paid for. It is a liability on the company's balance sheet. Accounts payable represent the short-term obligations that must be settled within a specific period, usually within 30 to 90 days.
When a company receives goods or services from a supplier, the invoice or bill is recorded as an account payable. This record serves as a legally binding agreement to make payment at a later date. The account payable reflects the outstanding balance due to the supplier until it is settled.
The management of accounts payable is crucial for maintaining healthy relationships with suppliers and ensuring the company's financial stability. It involves tracking and monitoring the payments due, ensuring they are paid on time to avoid late fees or penalties. Companies may negotiate favorable payment terms with suppliers, such as extended payment periods or early payment discounts, to optimize their cash flow and working capital.
In financial statements, accounts payable is typically listed as a current liability under the current liabilities section. It represents the company's obligation to settle short-term debts and is an essential component of a comprehensive financial analysis.
Common Misspellings for ACCOUNTS PAYABLE
- zccounts payable
- sccounts payable
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Etymology of ACCOUNTS PAYABLE
The word "accounts payable" has its roots in accounting terminology. "Accounts" refers to the financial records or statements of a business, while "payable" is derived from the verb "to pay". In accounting, "accounts payable" specifically refers to the money owed by a company to its suppliers or creditors for goods or services that have been received but not yet paid for. As such, the term "accounts payable" combines these two concepts to represent the financial liability of a business. The etymology of the word lies in the combination of the meanings of "accounts" and "payable" within an accounting context.
Similar spelling words for ACCOUNTS PAYABLE
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