Assets & Liabilities
Accounts Payable
Money your company owes to suppliers for goods or services received but not yet paid for.
Accounts payable (AP) is a current liability on the balance sheet. It grows when you receive goods or services on credit — the vendor delivered, you haven't paid — and shrinks when you send payment. Until the invoice is paid, that obligation is yours, and it belongs on the balance sheet today, not when the money leaves your bank account.
AP is a timing tool, not a trick. Paying in 30 days while collecting from customers in 45 days is normal working-capital management. Problems start when AP aging stretches past terms: suppliers notice, terms tighten, and a lengthening AP balance can be a sign that you're funding operations with vendor money because there isn't enough cash.
Example
Your design agency delivers a $6,000 project on March 28 and invoices net-30. You record a $6,000 expense and a $6,000 accounts payable balance in March — the expense belongs to March because the work happened in March. The cash leaves your account on April 27.
Common questions
What is the difference between accounts payable and expenses?
An expense is what you incurred; accounts payable is the obligation to pay for it. You can have an expense with no AP (you paid by card immediately) and AP that relates to last month's expense. During close, you accrue uninvoiced costs so both the expense and the payable land in the right period.
Is accounts payable good or bad?
Neutral to good. Standard payment terms let you keep cash longer without penalties. It turns bad when balances age beyond terms consistently — that signals cash stress, damages supplier relationships, and can trigger late fees or supply interruptions.
Practice this in the game
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