Account payable is the amount that a company owes to its suppliers and creditors. It is an obligation on the business to pay the short term credits to the vendors and alike.
Generally account payable entries are treated under liability section of the balance sheet. When goods are purchased, invoices are issued. When the invoice is entered in the system the AP balance gets credited. Similarly, when the invoice is cleared the account gets debited.
The AP balance must be properly maintained. It must be equal to the number of invoiced received and filed from the vendors.In many instances there might be chances of receiving double invoices for the same product or it might happen that the same vendor is paid twice.
AP is very important for any business as it ensures timely payment which will help the business to maintain the credibility and will also predict the cash position of the company.
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