Accounts payable (AP) is money a company owes to its suppliers or vendors for goods and services that have been delivered but not yet paid for. It appears as a liability on the balance sheet.
When a business receives an invoice with payment terms — “Net 30,” for example — the amount owed sits in accounts payable until it’s paid. It’s essentially a short-term IOU to your suppliers.
You’ll hear this when…
AP comes up in almost every conversation about a company’s cash management. The “AP department” or “AP team” is the group responsible for processing and paying vendor invoices. “Running something through AP” means submitting it for payment through the standard invoicing process.
If someone mentions “AP aging,” they’re talking about a report that shows how long invoices have been outstanding — how much is 30 days overdue, 60 days, 90 days. A growing AP aging report can signal cash flow problems.
The flip side
Accounts payable is the mirror of accounts receivable. Your AP is someone else’s AR. What you owe as a buyer, they’re owed as a seller.
Source: IFRS, IAS 37 — Provisions, Contingent Liabilities and Contingent Assets