accounts payable

Beginner 💰 Finance / Accounting

Definition

Money a company owes to suppliers and vendors for goods or services received but not yet paid for. The grown-up version of 'I'll pay you back later,' except with purchase orders and payment terms.

Example Usage

Our accounts payable balance hit $5 million, which the CFO called 'optimizing working capital' and vendors called 'late payments.'

Origin

Double-entry bookkeeping terminology from medieval Italian merchants, from Latin 'computare' meaning 'to reckon'

Fun Fact

Some large companies strategically stretch accounts payable to 90+ days to use suppliers as free short-term lenders, a practice that's legal but makes procurement managers very unpopular.

Source: Balance sheet fundamentals

Related Terms

Advanced

funded status

The difference between a pension plan's assets and its obligations, revealing whether there's enough money to pay promised benefits or whether future employees will be holding the bag. Spoiler: there's usually not enough.

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Intermediate

days payable outstanding

The average number of days a company takes to pay its suppliers, calculated by dividing accounts payable by daily cost of goods sold. Low numbers mean you're a prompt payer; high numbers mean you're using suppliers as a free bank.

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Advanced

Crossborder Intercompany

Transactions between related entities in different countries, creating a transfer pricing nightmare and tax optimization opportunity. It's where legitimate business meets aggressive tax planning, separated by a very fine line.

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earnings before interest and taxes

Operating income that excludes financing costs and tax expenses, providing a clearer view of operational performance. It's EBITDA's more conservative cousin that remembers depreciation and amortization are real expenses.

💰 Finance / Accounting
Intermediate

diligence

In business and legal contexts, the thorough investigation and analysis conducted before making a decision or completing a transaction. Due diligence is the corporate equivalent of looking before you leap, except you're also hiring consultants to examine the depth, temperature, and legal ownership of the water below. Skip this step and you might acquire a company that's actually three lawsuits in a trench coat.

💰 Finance / Accounting
Intermediate

depletion

The exhaustion of a resource faster than it can naturally replenish itself, whether that's oil reserves, soil nutrients, or your marketing budget by mid-quarter. In accounting, it's the method for allocating the cost of extracting natural resources. Basically, fancy terminology for "we used it all up."

💰 Finance / Accounting

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