Money a business owes to suppliers, vendors, or creditors for goods or services received but not yet paid for. Recorded as a current liability on the balance sheet.
Understanding Accounts Payable (A/P)
Accounts payable (A/P) represents the short-term obligations a business owes to its suppliers, vendors, and creditors for goods or services that have been received but not yet paid for. It appears as a current liability on the balance sheet because these debts are typically due within 30 to 90 days.
For ecommerce businesses, accounts payable commonly includes amounts owed to product suppliers, packaging vendors, freight companies, and service providers like warehousing or marketing agencies. Proper A/P management ensures you take advantage of early-payment discounts and avoid late-payment penalties.
In double-entry bookkeeping, when you receive an invoice, you debit an expense or asset account and credit accounts payable. When you pay the invoice, you debit accounts payable and credit cash.
Why It Matters for Ecommerce
Ecommerce sellers who manage inventory must track accounts payable carefully to maintain healthy supplier relationships and accurate cash-flow forecasts. Knowing exactly how much you owe — and when it's due — prevents overdrafts and helps you time inventory purchases around marketplace payout schedules.
Practical Example
Your supplier ships 500 units of product and invoices you $3,000 with Net-30 terms. You record $3,000 in accounts payable immediately. When you pay the invoice 25 days later, A/P decreases by $3,000 and your cash account decreases by the same amount.
Related Terms
Accounts Receivable (A/R)
Money owed to a business by customers for products or services delivered but not yet paid for. Recorded as a current asset on the balance sheet.
AccountingBalance Sheet
A financial statement that reports a company's assets, liabilities, and equity at a specific point in time. The fundamental equation is Assets = Liabilities + Equity.
AccountingAccrual Accounting
An accounting method that records revenue when earned and expenses when incurred, regardless of when cash actually changes hands. Required by GAAP for most businesses above a certain size threshold.
Related Tools
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