Accounts payable. the amount of short-term debt payments a business needs to make to its creditors, is listed under the current liabilities section of the balance sheet. A company often places accounts payable at the top of its current liabilities section. This is because it represents the first claim on the company's assets by its creditors.
Composition of a Company Balance Sheet
The balance sheet shows a snapshot of a company's financial position for a specific period of time. Investors and creditors can review the balance sheet to see what a company owns and what it owes to other parties before deciding whether to contribute to the company's financing.
Each balance sheet can be broken down into three major categories. assets, liabilities and owner's equity. Assets represent the company's holdings and its estimated monetary value. Items such as cash, inventory, supplies and
goodwill are considered business assets. Liabilities, where accounts payable is listed, show the amounts owed by the business to third parties such as lenders or the government. Owner's equity describes how much value is left over after the company's liabilities are deducted from its assets. This is also referred to as shareholders' equity for publicly traded companies.
Position of Accounts Payable
Accounts payable is calculated by summing the total obligations of the company toward suppliers of goods, services, resources or credit. Typically, accounts payable only includes money owed in the next 30 days. Accounts payable is part of the company's current liabilities. Other current liabilities include notes payable and accrued expenses. Current liabilities are differentiated from other liabilities. such as long-term liabilities and mortgages, by only containing obligations due to be paid within 12 months after the date of the balance sheet.