What are Payables?

Payables refers to the full range of obligations owed by a business. A business typically keeps close watch over its ability to meet the obligations represented by its payables. Otherwise, late payments or defaults can trigger a slide in a company's credit rating, and could even lead to bankruptcy. The payables concept also applies to households, where examples of payables are mortgage invoices, doctor's bills, and utility statements.

Accounting for Payables

In many organizations, the transaction volume associated with payables is higher than in any other area. Most of these transactions are recorded through the payables module in a firm’s accounting software. This module presents users with a simplified template for how to enter supplier invoices into the system. Usually, a standard charge code is associated with each supplier, so that all invoices associated with that supplier are automatically charged to that account. Users can manually override the default charge code when they want to charge an invoice to a different account.

Examples of Payables

Examples of payables include the following items:

Trade payables. Includes all invoices owed to suppliers in the normal course of business, such as for purchased goods or services provided to the business.
Non-trade payables. Includes all invoices owed to third parties that are outside the normal course of business, such as payments owed to related parties.
Taxes payable. Includes all taxes owed to taxing authorities, covering such items as sales taxes, use taxes, and income taxes.
Wages payable. Includes the wages earned by employees from the date of their last paychecks through the end of the reporting period.

The first three of these payables are usually processed through the accounts payable system, while the last type of payable is processed through the payroll system.

Related AccountingTools Courses

Optimal Accounting for Payables

Payables Management

Presentation of Payables

Payables are mostly classified as short-term liabilities on the balance sheet; this classification applies when a payable is due within the next twelve months. All other payables are classified as long-term liabilities. Since the balance sheet line items are sorted in declining order of liquidity, this means that short-term payables are reported higher on the balance sheet than long-term payables.