What is accounts payable?

Accounts payable refers to the amount of money a business owes to its suppliers or creditors for goods and services received but not yet paid for. It is classified as a current liability on a company's balance sheet, representing short-term financial obligations that are typically due within one year. The primary function of accounts payable is to manage cash flow by allowing a business to purchase items on credit, thus providing some time to generate revenue from those items before payment is required.

This distinguishes accounts payable from other financial concepts. Long-term loans owed to banks pertain to debts due over a longer period and aren't classified as accounts payable. Equity owed to shareholders relates to ownership stakes in the company, not obligations to pay for goods or services. Fixed costs associated with operations involve regular expenses necessary for running the business, which aren’t directly linked to the immediate obligations represented by accounts payable.

In summary, accounts payable is a crucial component of a business's short-term financial structure, highlighting the company's obligations to pay for expenses incurred during operations.