What Are Bills Payable?

Bills payable can be a synonym of accounts payable, or it can refer specifically to short-term borrowing by banks from other banks, often the country's central bank.

Understanding Bills Payable

In the context of personal finance and small business accounting, bills payable are liabilities such as utility bills. They are recorded as accounts payable and listed as current liabilities on a balance sheet.

In the context of banking, bills payable refers to a bank's indebtedness to other banks, usually a Federal Reserve Bank (in the U.S.). These loans are backed by collateral consisting of the bank's promissory note and a pledge of government securities. In other words, bills payable is the money a bank borrows, mainly on a short-term basis, and owes to other banks. Banks borrow this money in order to maintain adequate liquidity levels.