Definition
Accounts payable (AP) is the short-term liability a business owes to suppliers for goods or services purchased on credit but not yet paid for.
How It Works
Every time a supplier delivers goods or services on credit terms (net-30, net-60), the invoice posts as a credit to accounts payable and a debit to inventory or expense. When the business pays, AP is debited and cash credited.
AP sits in current liabilities on the balance sheet. Managing it well — paying late enough to preserve cash but early enough to keep supplier relationships — is a core working-capital lever.
Saudi Context
ZATCA’s e-invoicing system makes AP largely automated for Saudi businesses: every supplier invoice is digitally received and ready to post directly into the AP ledger.
Worked Example
A trading company in Dammam receives a SAR 50,000 invoice from a supplier with net-45 terms. AP rises by SAR 50,000 today. On day 45 the company pays via bank transfer: AP drops to zero, cash drops by SAR 50,000.