Accounts payable is an account within the general ledger, which keeps track of the money that needs to be paid to the company's suppliers, vendors, or creditors. It is also referred to as a short-term debt owed to the company's creditors. It should be paid as quickly as possible to avoid running past the due date.
Accounts payable is shown as a liability on the company's balance sheet. Paying off these within the agreed period will improve the cash flow of the company. Accountants or bookkeepers enter the amount of the received invoices in the account payable sub-ledger. Soon after the company clears the invoice, the accountant enters the credit.
Accounts payable is also referred to as the department responsible for the clearing payments the company owes to its creditors. The department or division is called AP, short for accounts payable.