Is Accounts Payable An Asset Or A Liability

There are lots of transactions that take place in a business during the business cycle. Some of them are done using cash and some are done on credit.

A transaction that is settled on cash at the time of exchanging of goods and services is known as a cash transaction while a credit transaction means exchanging has been done but payment will be made on a specific date.

Definition Of Accounts Payable

Payable is the amount that a company owes from the creditors or supplier that is due because of some transactions of goods or services. Entries in accounts payable are recorded when a transaction is done between two parties without paying cash.

Account payable is recorded in the balance sheet under the heading of the current liabilities because these accounts are the short-term debts that have to be paid within the year. 

Having knowledge about accounts payable is necessary for a business to maintain a positive cash flow.

The opening balance of an account payable is normally a credit balance but if a company pays more than its debts then the opening balance will be debited on the account payable.

NOTE: Accounts payable balance will always be increased by the credit entries and decreased by the debit entries.

Is Accounts Payable An Asset

Account payable is the obligation for a company that must be settled within the deadline of the transaction. (Click Here To Read About Assets)

Payable is the current liability that has to pay within the year or within the business cycle, so accounts payable are treated as a liability not an asset in the balance sheet of a company.

Must remember, if there is an entry in the account payable, there will be another entry for that same transaction in the other accounting heads which can be an asset or an expense.

Conclusion

Accounts payable are the short-term debts that are classified as current liabilities, not as assets.