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another important term
An '''account payable''' (AP) is an individual's or corporation's financial obligation to pay off a debt in full that it owes to another financial entity. In simple accounting, accounts payable are often used as a general term for debts and liabilities, and because of this, they are often recorded as such (see below).
<ref name="invest">http://www.investopedia.com/terms/a/accountspayable.asp Accounts Payable]</ref>
==On Financial Statements==
Because they represent debt that an individual or business organization owes to another such entity, accounts payable are virtually always listed in the liabilities section on a balance sheet. As such, they subtract from the net value of a financial entity because they represent a debt. This is opposed to accounts receivable, which increase the net value of an individual or company because they represent an asset.
==Examples==
* When you purchase a home with a mortgage through your bank, you now possess an account payable. You owe the bank your monthly payment, and because this represents a personal debt for you, it is classified as an account payable. The bank, however, would record an account receivable, as these two are considered opposites in simple accounting practices.
* Any time you take out a loan or you a credit card to purchase a good or service, you are creating an account payable for yourself, as you are taking on a debt owed to another business entity.
==See Also==
[[Accounts receivable]]
==References==
<references/>
[[Category:Accounting]]
[[Category:Accounting Terms]]
<ref name="invest">http://www.investopedia.com/terms/a/accountspayable.asp Accounts Payable]</ref>
==On Financial Statements==
Because they represent debt that an individual or business organization owes to another such entity, accounts payable are virtually always listed in the liabilities section on a balance sheet. As such, they subtract from the net value of a financial entity because they represent a debt. This is opposed to accounts receivable, which increase the net value of an individual or company because they represent an asset.
==Examples==
* When you purchase a home with a mortgage through your bank, you now possess an account payable. You owe the bank your monthly payment, and because this represents a personal debt for you, it is classified as an account payable. The bank, however, would record an account receivable, as these two are considered opposites in simple accounting practices.
* Any time you take out a loan or you a credit card to purchase a good or service, you are creating an account payable for yourself, as you are taking on a debt owed to another business entity.
==See Also==
[[Accounts receivable]]
==References==
<references/>
[[Category:Accounting]]
[[Category:Accounting Terms]]