Account payable is the accounting account that shows the liability of a company or a business. It shows the obligation of a short term debt a business has to pay to someone like creditors. The account payable account is counted in the liabilities of a company so it is located under the liabilities head of the balance sheet of the business. The accounts payable represents and manage all the outgoing payments of the company. These payments are either made to the creditors or shareholders or the suppliers of the company.
As we have explain above that accounts payable are the liability or obligations of a company so they must be paid under the specific financial period otherwise they may result in default of the company. Most of the accounts payable are short term payments or short term debts that must be paid within that financial period. The payment that a company needs to pay to banks and other financial institutes is also included in accounts payable.
Accounts payable are further categorized into sub categories according to the type of the creditors and institutions. For example trade payable is the name given to the account payable that deals with the purchase of physical goods and raw material. Another example of account payable subcategory is expense payable that records the all the expenses of the company and payment due against these expenses. A proper audit of account payable is conducted by the auditors and they often look for invoices, expense reports and other documents such as cheaques.