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Account Payable – Accounts Payable (also known as trade payables) is the amount of money a business owes to its suppliers for goods or services purchased on credit.
Account Payable – What is Account Payable?
Accounts payable, also known as accounts payable, is formed when a business buys goods or services from suppliers by deferred payment.
Accounts payable are expected to be paid off within one year or within one business cycle (whichever is shorter). Accounts payable are recorded on the company's balance sheet under the category of short-term liabilities.
Features of Accounts Payable
- Accounts payable is a form of capital appropriation of the business.
- Accounts payable is recognized as a liability of the enterprise but no interest is incurred.
- Accounts payable is recognized together with the purchase cost of the business. However, this does not affect the cash flow because in fact the business has not yet paid the supplier.
Accounts Payable and Accounts Receivable
Receivables represent amounts owed by a business to customers and are recognized as assets. In contrast, accounts payable is the amount that the business owes to others, and is recorded as a liability.
In a business relationship, one business's payable may be another's receivable. For example, business A sells goods to business B by deferred payment. Then, at enterprise A, a receivable will arise, and at the same time, enterprise B will also form a payable.
Accounts Payable Turnover Analysis
The payables turnover ratio is a measure of short-term solvency, used to determine how quickly a business pays its suppliers. This metric represents the number of times a business pays off its accounts payable within a certain period of time, usually a year.
Analysts rely on this index to see how businesses have used the credit policy of suppliers. Too low accounts payable turnover ratio can negatively affect the reputation of the business with suppliers.
Above is information related to the term “Account Payable”. In addition, to help accountants reduce manual operations and digitize accounting and financial operations in organizations, Bizzi pioneered the launch of the Lean Cost Management Platform for businesses.
With a solution to automate bill processing using AI artificial intelligence and process automation using RPA robots, Bizzi has become the name mentioned as an effective right-hand man for the accounting team in the community. Vietnamese businesses thanks to touching the "pain" of companies in invoice processing and cost management.
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