Accounts Payable Definition
This is the amount of
money that is owed for the purchase of either goods or services from any
organization or any entity at a particular date. This is a kind of current liabilities. This term is showed in the Balance Sheet as part of the Total
Liability of the organization.
Importance of Accounts Payable
Accounts Payable is one of
the major liabilities for an organization. An organization must clearly and
precisely identify the amount of Accounts Payable to compare the liability of
the firm with the amount of assets it owns and also to compare its ability to
pay that Account payable from the amount of cash or other assets it possesses.
The amount of Accounts Payable is also used to identify different financial
ratios that indicate the overall position of the firm compared with other years
and with even other firms in its industry.
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