Accounts Payable (AP)

Written by Fmi.Online Sunday August 8, 2021
The amount due to creditors after acquiring goods or services on credit has to be paid back in a short period. It is a short-term liability that appears on the balance sheet under current liability.
In the IFRS, accounts payable are referred to as trade payables, which are debts created by formal legal documents. Accounts payable are important for a business to keep its cash flow healthy.

Explanation:

Under the current liabilities section of a company's balance sheet is the amount of accounts payable that the company has owed at a particular time. Defaults can be avoided by making accounts payable. Payables, at an organizational level, are short-term debt payments due to suppliers. One business sends a payable to another business on a short-term basis. As a result, its receivables would increase.
Accounts payable is an essential figure on a company's balance sheet. When the amount of accounts payable (AP) increases over the previous period, that means that more goods or services are being purchased on credit, rather than paid for with cash. A business's cash flow is greatly influenced by accounts payable management.
When a company owes money to another company for services rendered or products provided but has not yet paid, a payable is created. In some cases, this will be in the form of purchase on credit from a vendor or a subscription or payments due after the goods or services are received.

In a nutshell:

  • Payables are amounts owed to vendors or suppliers for goods or services delivered, but not yet paid.
  • In a balance sheet of a company, the accounts payable balance includes all outstanding payments owed to vendors.
  • In the cash flow statement, you will see whether the total AP increased or decreased from the prior period.
  • To enhance cash flow, management may decide to pay outstanding bills close to their due dates whenever possible.
top-arrow
Our Courses are designed to boost your career

Launch your career with Fmi’s Learning Pathway

Choose a learning pathway that best meets your needs and ambitions. Not sure which Fmi learning pathway is right for you? Explore our CareerBuddy videos for help and advice.

Investment banking pathway
  • courses-clock60+ hours
  • courses-desktop9 courses

Investment banking offers many exciting career opportunities for students. From Financial Analysts to Investment Management, and Sales & Trading to a wide range of roles in infrastructure such as IT, Risk or Compliance. This pathway is designed to help you understand the investment banking industry, the roles investment banks are recruiting for, and most importantly, help you to develop the practical skills you need to get into the industry and your preferred role whether this be as part of a school leaver, intern or graduate program.

FMI Online Student join-student-img2 FMI Online Student
55,000+ students currently enrolled
Global markets pathway
  • courses-clock70+ hours
  • courses-desktop10 courses

Global markets provide a range of important products and services to corporates, institutions and governments worldwide from executing trades and managing risk to providing quality research content. A key business area in all investment banks, global markets offers a wide range of career paths for students to consider across all functions and at all levels from school leavers to internships through to graduate programs.

FMI Online Student join-student-img2 FMI Online Student
85,000+ students currently enrolled
Asset management pathway
  • courses-clock50+ hours
  • courses-desktop8 courses

The asset management industry is a global industry worth over 100 trillion US dollars. It plays a crucial role in managing the assets of retail and institutional investors, offering a wide range of exciting careers in doing so. If you’re looking to forge a career in asset management, our Asset management pathway is perfect for you. We help you build the skills all asset managers are looking for and explore everything you need to know about the industry and the wide range of roles available in the sector

FMI Online Student join-student-img2 FMI Online Student
100,000+ students currently enrolled