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Definition: Accounts Payable is an accounting transaction that reflects money owed by the firm to entities (typically suppliers) on the purchase of products or services on credit. Includes also expenses (advertising, travel, entertainment, office supplies and utilities).
It is also the name of the department that is looking after the payment of this money.
AP is shown on the balance sheet as a liability.
In most firms, AP is typically processed by matching the received invoice to the packing slip and purchase order, and if all is in order, the invoice is paid. This is referred to as the three-way match.