Why it matters
Accounts payable shows the bills the business still has to pay, and it affects the cash forecast and the year-end deductions. A missing bill understates expenses and overstates profit.
Example
A business receives a $3,000 software invoice in December and pays it in January. At year end, the invoice is in accounts payable, and the expense belongs to December.
Related terms
Questions about Accounts payable
How is accounts payable different from a credit card balance?
Accounts payable is money owed to vendors for bills received. A credit card balance is money owed to the card issuer, which may include many purchases and interest.