How to Find Accounts Payable on a Balance Sheet

How to Find Accounts Payable on a Balance Sheet | Accounting Smarts
Charles Hall

Last updated by

Charles Hall


June 10, 2022

Accounts payable is a credit balance classified as a current liability in the liability section of a balance sheet.

The balance sheet is comprised of three sections: Assets, Liabilities and SHAREHOLDERS’ Equity.

Accounts payable is a credit balance classified as a current liability in the liability section of a balance sheet. The current classification is a designation of an amount that will be paid within 1 year or less. Typically accounts payable are payable within 30-60 days. Long-term liabilities have payment terms that extend beyond one year.

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Table of contents

What is accounts payable?

Accounts payable is the amount of money owed to creditors, suppliers and vendors and is considered short term debt payable in 30-60 days as noted above. It represents obligations incurred during the normal operation of a business and includes bills and invoices for utilities, rent, insurance, internet, supplies and raw materials.

The accounts payable balance on the balance sheet is calculated by adding all unpaid invoices to arrive at a grand total. These unpaid invoices are recorded and tracked in a report called the accounts payable ledger.

How to find accounts payable on a real-life balance sheet

A real-life example of accounts payable on an actual balance sheet may give you a better visual of how accounts payable fits into a company’s financial picture.

Below is a balance sheet example for Teddy Fab Inc. The balance sheet is a snapshot of the financial condition of a company at a point in time, in this example December 31, 2100.

You will notice the 3 sections ASSETS, LIABILITIES AND SHAREHOLDER’S’ EQUITY. Also notice assets and liabilities are subdivided into current and long term.

Assets are debit balances, liabilities and shareholder equity are credit balances. You will notice that total assets of $472,100 equals the total of liabilities and shareholder equity of $472,100. The total debits must always equal the total credits. Accounting is known as a double entry system and this is what keeps debits and credits balanced.

Assets are things you OWN that have value. Liabilities are things you OWE. Equity is what is left and is the book value of the company. But don’t be confused, the book value isn’t the market value of the business.

So, to locate the accounts payable balance look under the Liabilities and Shareholders’ Equity section and you will find the accounts payable balance of $30,000. The $30,000 is the amount Teddy Fab Inc owes to its suppliers and must be paid in 30-60 days.


Why is accounts payable important?

Accounts payable is important as it impacts cash flow, borrowing costs, credit rating and attractiveness to investors. Because of these reasons, it is important to have an effective and efficient process to handle accounts payable.

Cash flow is the life blood of a company, failure to maintain accurate records will lead to poor decisions in spending cash. If accounts payable are understated you may overspend. If accounts payable are overstated it may lead to delay in payments.

Trust is developed with 3rd party institutions when accounts payable are managed properly. Banks are more likely to loan money or reduce borrowing costs, your credit rating will improve because you pay on time and your suppliers are more likely to sell their products and services to you on credit thus freeing up cash.

What is the difference between accounts payable and accounts receivable?

Maybe the best way to present this comparison is to show it in table format and list how accounts payable (AP) and accounts receivable (AR) are similar and how they are different.

How are AP and AR similar How are AP and AR different
Both are classified as current or short-term amounts Accounts payable is a CREDIT (liability)
Accounts receivable is a DEBIT (asset)
Both found on the balance sheet Accounts payable is a liability – you owe
Accounts receivable is an asset – you own
Both impact the company cash flow Accounts payable is created when you buy something
Accounts receivable is created when you sell something
Both have specific terms for payment: 30, 60 or 90 days. Accounts payable deals with vendors and suppliers
Accounts receivable deals with customers

Is it a problem if accounts payable is more than accounts receivable?

The answer to this question is not a simple yes or no, rather it depends.

Accounts payable and accounts receivable go hand in hand in determining your cash flow. Accounts payable are what you owe and accounts receivable are what is owed to you. You can see the correlation. If you are slow to collect accounts receivable it may cause problems in paying what you owe.

With the above correlation stated, it is preferred to have a higher accounts receivable balance and a lower accounts payable balance as this indicates you have more resources coming in than obligations needing to go out.

However, if accounts payable is higher than accounts receivable doesn’t mean the company is in a bad position. You would also want to consider cash balances. Cash on hand is better than accounts receivables as it is a resource available to use immediately. Possibly the combined cash and accounts receivable creates a balance higher than accounts payable.

Overall, it is better to have more assets than liabilities, but each company is different and needs to be considered in its entirety.

Regardless of the balance of accounts payable or accounts receivable, they both need to be managed effectively. More than likely if these two areas of your business are being neglected there is probably a cash flow challenge.

Here are a few tips to consider in effectively managing either accounts payable or accounts receivable:

  • Keep the process simple. This may be as simple as an organized file to keep track of all invoices. A scheduled time each day to process and record new transactions or payments
  • Maintain accurate and up to date subledgers for each. Having current and up to date financial information allows you to make decisions immediately. The sub ledgers are the key. It identifies every transaction related to a sale or a purchase and provides the information for aging reports.
  • Invest in an accounting software to track and manage the details. Accounting software is cheap, convenient and online. There really is no reason even a small company can’t invest in an online resource. Check out for $30 a month you get all the capabilities you need to automate the accounting process.
  • Review account aging reports weekly. The aging reports are key. Aging allows you to see what customers or vendors are past due or close to past due. It gives you focused attention on the most critical balances. An automated system makes this report easy to produce.
  • Communicate regularly with both customers and vendors. Problems happen, but good relationships with customers and vendors allow flexibility and ease of getting over these problems. A vendor that knows you, is more likely to work with you on delayed payments. A customer that knows you is more like to do everything to pay their invoices.

If you follow these simple suggestions you should see a steady stream of collections coming in from accounts receivable to pay your accounts payable.