Accounts payable (AP) is the total a business owes to its suppliers for goods and services already received on credit. Also called creditors or trade payables, it is a current liability on the balance sheet because it is normally settled within a short period.
What it means
When a business buys on credit, it records the cost (or asset) and raises a payable rather than paying cash immediately. The payable is cleared when the supplier is paid. The detail of who is owed what is kept in the creditors subledger, which rolls up into a single accounts payable control account in the general ledger.
Where it fits in
Payroll generates payable-like obligations of its own - amounts owed to SARS, medical aids and retirement funds - though these are usually tracked in dedicated statutory liability accounts rather than trade payables. The principle is the same: a cost is recognised now and the cash settles later.
Key rules
- Amounts owed to suppliers for goods or services received.
- A current liability, normally settled within twelve months.
- Detail sits in the creditors subledger; the total in a control account.
- Credited when the liability is raised, debited when paid.
