What is the official business definition of Accounts Payable Assets or Liabilities? The definition can be found in the financial accounting definition found in all accounting textbooks, including the Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS).
Accounts payable is a liability that represents the amount owed by a company to its suppliers and others for goods and services purchased on credit. This is to be distinguished from accounts receivable, which is an asset that represents uncollected amounts receivable from customers. Accounts payable is an important concept for businesses to understand because it indicates how well the company is managing its working capital, which is an important measure of management effectiveness. Accounts payable consists of unpaid bills for items that have been received on credit by a business. It also includes bills for items that have not yet been received but which have been ordered and are expected to arrive within the next month or so. The balance sheet shows how much of a company’s liabilities are made up of accounts payable, while the income statement shows how much of its revenues are made up of accounts receivable.