Explained
It sits under current liabilities on the balance sheet. A supplier bill creates the liability on the day the goods arrive, not the day it is paid — that is accrual accounting: an expense is recorded when it occurs, not when it is settled. An ageing of payables shows what is about to fall due before it goes late.
Example
Goods worth 20,000 arrive on 30-day terms: payables rise by 20,000 today, and cash is untouched until payment.
Related terms
- Accounts receivableAccounts receivable are the amounts customers owe a business for invoices issued but not yet collected.
- Journal entryA journal entry records one transaction in the books as equal debit and credit sides, with a date, a description and a reference.
- Balance sheetA balance sheet shows a business’s assets, liabilities and equity at a date; assets always equal liabilities plus equity.