Description of accounts payable
“Accounts Payable” is used as a generic term to represent different things related to the AP process. Some of the common usages of the term are:
Accounting entry: As explained earlier, “Accounts Payable” refers to the accounting entry that shows a current liability payable to the supplier of goods and services for goods supplied or services rendered. This is a short-term liability and classified as current liabilities under the “Liabilities” section of the balance sheet.
Accounts Payable Subledger: Businesses and corporations have huge transactions involving their accounts payable process. They receive goods and services from various suppliers and must manage timely payments to these creditors to avoid payment defaults and meet payment terms. They use a subsidiary ledger usually referred to as “Subsidiary Accounts Payable” and sometimes simply “Accounts Payable”.
Accounts Payable Process: The term accounts payable is also used to refer to the accounts payable process. This process involves receiving the goods or services, verifying the quantity and quality with the supplier’s invoice, and releasing payment in accordance with the agreed payment terms.
Accounts Payable Department: As companies have a large number of transactions related to the AP process, so they often need a separate division, branch or department to handle and manage all AP related transactions. This department is referred to as the Accounts Payable department and sometimes simply as Accounts Payable.
Eventually, once we understand the Accounts Payable process and what its elements are, we can easily understand what it is referring to at any time.