Account Payable: A Comprehensive Guide to Its Legal Meaning and Functions
Definition & Meaning
Accounts payable refers to the money a person or business owes to suppliers or creditors for goods and services received but not yet paid for. This financial obligation is typically recorded in a statement or file, which tracks the amounts owed. When a bill is received, it is added to the accounts payable, and once payment is made, it is removed from the record. Common examples of accounts payable for households include utility bills, subscription services, and other regular expenses.
In a business context, accounts payable also describes a department responsible for managing these debts. This unit handles tasks such as authorizing purchase orders, organizing account withdrawals, and auditing expense reports, ensuring that all financial transactions are accurately recorded in the general ledger.
Legal Use & context
Accounts payable is primarily used in the context of business finance and accounting. It plays a crucial role in managing a company's cash flow and financial obligations. Legal professionals may encounter this term in various areas, including corporate law, financial regulation, and tax law. Users can often manage accounts payable issues using legal templates and forms provided by services like US Legal Forms, which can help streamline the process of documenting and paying debts.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A small business receives an invoice for office supplies amounting to $500. This amount is recorded as accounts payable until the business pays the invoice.
Example 2: A household receives a monthly bill from the electric company for $150. This bill is added to the household's accounts payable until it is paid. (hypothetical example)