Finance · business glossary
What is Accounts payable?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
Money you owe suppliers or vendors for goods or services you've already received but not yet paid for.
Accounts payable explained
Accounts payable is money you owe suppliers for goods or services you have received but not yet paid for.
formula
Creditor days = Accounts payable ÷ Annual purchases on credit × 365
example
Owing ₹6 lakh on annual credit purchases of ₹48 lakh means you take about 46 days to pay suppliers.
why it matters
Longer supplier terms help cash flow, but late payment damages relationships and can cost discounts.
common mistake
Stretching payments so far that suppliers raise prices or stop credit.
Frequently asked questions
What is Accounts payable?
Money you owe suppliers or vendors for goods or services you've already received but not yet paid for. Accounts payable is money you owe suppliers for goods or services you have received but not yet paid for.
How do you calculate Accounts payable?
Creditor days = Accounts payable ÷ Annual purchases on credit × 365. Owing ₹6 lakh on annual credit purchases of ₹48 lakh means you take about 46 days to pay suppliers.
Why does Accounts payable matter?
Longer supplier terms help cash flow, but late payment damages relationships and can cost discounts.
What is a common mistake with Accounts payable?
Stretching payments so far that suppliers raise prices or stop credit.
Related terms
Accounts receivable
Money customers owe you for goods or services already delivered but not yet paid for.
Working capital
The cash tied up in day-to-day operations — inventory and money owed to you, minus money you owe — that keeps the business running between sale and payment.
Vendor management
The ongoing process of selecting, evaluating, and maintaining relationships with external suppliers.