Definition of Accounts Payable

by Investing School on January 3, 2010

Accounts payable refers to the detailing of transactions in relation to a file or account that contains money that a person or company owes to other companies, suppliers, or a vendor that has not been paid yet. One common acronym for accounts payable is AP. Invoices are received, added to the file and then removed when paid. Accounts payable can also be viewed as a form of credit that suppliers, vendors or companies provide to their customers allowing them a time period to pay for products or services that have already been received.

The field is not regulated, but there are international standard entities of which many model their practices after. One example of an association that sets practice standards is the International Accounts Payable Professionals or IAPP. There are more than 5,000 members fn this association in the United States, United Kingdom, Canada, and other countries.

If you are thinking more locally like in a common household, you could consider accounts payable the bills that are received and paid each month. These bills would include the electric company, cable television, telephone, satellite dish, newspaper subscription and other monthly service bills. Most people who pay these regular bills often keep track of the transactions by noting them in a checkbook or home-based computerized accounting system or program. Most companies, however, will use more sophisticated systems such as accounting software that is tracked into a liability account.

Many companies nowadays are looking towards automation and prefer to use Accounts Payable Automation.

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{ 1 comment… read it below or add one }

Accounts Payable Automation April 20, 2010 at 1:56 pm

I especially liked what you said about how most companies are moving towards A/P automation. Automation, standardization, and streamlining of manual processes helps ensure that companies have additional funds to reinvest in the business. We’re working with several thousand companies who are seeing the benefits.


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