Accounts payable (AP) refer to a companys short-term obligations owed to its creditors or suppliers, which have not yet been paid. It is a liability on a companys balance sheet where it is a debt that a company owes to another party, not an income or expense item. AP is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. The AP departments main responsibility is to process and review transactions between the company and its suppliers and to make sure that all outstanding invoices from their suppliers are approved, processed, and paid. The accounts payable process starts with collecting supply requirements from within the organization and seeking quotes from vendors for the items required. In households, accounts payable are ordinarily bills from the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services.

Accounts payable are obligations that must be paid off within a given period to avoid default. A companys total accounts payable balance at a specific point in time will appear on its balance sheet under the current liabilities section. Although some people use the phrases "accounts payable" and "trade payables" interchangeably, the phrases refer to similar but slightly different situations. Trade payables constitute the money a company owes its vendors for inventory-related goods, such as business supplies or materials that are part of the inventory. Accounts payable include all of the companys short-term obligations.

In accounts payable, a simple mistake can cause a large overpayment. A common example involves duplicate invoices. An invoice may be temporarily misplaced or still in the approval status when the vendor calls to inquire into its payment status. After the AP staff member looks it up and finds it has not been paid, the vendor sends a duplicate invoice; meanwhile, the original invoice shows up and gets paid.

Overall, accounts payable is an essential function in every finance department, and it requires a number of both "soft" and "hard" skills to be successful.