A:

In financial accounting, accounts payable is a current liability that shows the amount a company owes for items or services purchased on credit. This excludes types of debt accompanied with a promissory note, such as mortgages. Accounts payable may also be referred to as trade payable to further distinguish it from notes payable and interest payable.

Under the generally accepted accounting principles, or GAAP, accounts payable is listed as a liability on a company's balance sheet. It is normally presented as the first item under current liabilities because it represents the most immediate claim on the company's assets.

Like most liabilities, accounts payable almost always has a credit balance. These credits are recorded whenever a vendor invoice is received and the corresponding payable account is debited. Accounts payable is debited when the account is paid; cash is credited as the double-entry. Companies must maintain the timeliness and accuracy of their accounts payable process. A delayed accounts payable recording can under-represent the total liabilities. This has the effect of overstating net income in financial statements.

Effective and efficient treatment of accounts payable impacts a company's cash flow, credit rating, borrowing costs and attractiveness to investors. To safeguard a company's assets, accounts payable should be processed within a system of internal controls. This helps to prevent fraudulent invoices, inaccurate invoices, missed or double payments, or other errors. Bookkeeping is important with all liability accounts, but accounts payable receives more attention than most.

Accounts payable is typically only concerned with payment obligations that come due within the 30 days following the date of the balance sheet. This is also the reason many vendor invoices state amounts due in terms of "net 30 days" or "n/30."

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