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Accounts Payable for Dummies

noun


What does Accounts Payable really mean?

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Hey there! Let's dive into the wonderful world of accounts payable!

So, imagine you are in a candy shop with a huge variety of sweets. You're super excited to gobble them all up, but there's a teeny tiny problem - you forgot your money at home. Uh-oh! You really want those delicious candies, but you can't pay for them right now. This situation is somewhat similar to what "accounts payable" means.

Accounts payable is a simple term used to describe the money that a company or person owes to someone else. It's like having a bill you need to pay. When we say "accounts," we're referring to the money that a company has to pay to different people or organizations, like suppliers, vendors, or even their employees. And "payable" means the amount of money that needs to be paid by a specific deadline.

Now, let's make it even simpler. Think of accounts payable as a long list of IOUs, or promises to pay. Just like your shopping list, it includes the things you have to buy, but you haven't paid for them yet. In the case of a company, accounts payable lists all the things the company has received, like goods, services, or even loans, for which they still owe money.

Here's an example to help clarify things further. Imagine you own a lemonade stand, and your friend supplies you with lemons and sugar to make the lemonade. When your friend gives you the lemons and sugar, they now become part of your accounts payable. You still owe your friend money for those supplies, just like the candies you owe money for at the candy shop. Until you pay your friend, the amount you owe them remains on your accounts payable list.

Companies keep track of their accounts payable because it helps them keep organized regarding who they owe money to and for what. It's like having a to-do list to help you remember what needs to be paid and when.

So, to sum it all up, accounts payable is like a bill or a shopping list of things that a company owes money for. It includes all the things they've received but haven't paid for yet, like supplies, services, or even loans. It's important for companies to keep track of their accounts payable to stay organized and make sure they pay everyone on time.

I hope that makes sense! Let me know if you have any more questions or if there's anything else I can help you with.


Revised and Fact checked by Emma Johnson on 2023-11-06 02:46:41

Accounts Payable In a sentece

Learn how to use Accounts Payable inside a sentece

  • When you buy a toy from the store but don't have enough money to pay for it, you may have an accounts payable. It means you owe the store some money and need to pay them later.
  • If your mom buys groceries from the supermarket and promises to pay for them later, that is also an example of accounts payable. The supermarket keeps a record of what your mom owes them.
  • Sometimes, when you borrow a book from the library and they let you take it home for a while before returning it, the library keeps a note of the book as an accounts payable. This means you need to return the book later.
  • Imagine you go to a restaurant and have a nice meal, but you forgot your wallet at home. The restaurant manager might be kind and let you pay for the meal later, so the cost of your meal becomes an accounts payable.
  • If your dad buys a new bicycle from a shop and decides to pay for it in installments over a few months, the remaining money he needs to pay each month is called accounts payable.

Accounts Payable Hypernyms

Words that are more generic than the original word.