Bills payable definition
/What are Bills Payable?
Bills payable refer to amounts a business owes to suppliers or other creditors for goods and services purchased on credit. These obligations are typically recorded as short-term liabilities on the balance sheet and must be settled within a specified period, usually 30 to 90 days. Bills payable often arise from trade transactions where a supplier extends credit to the buyer, allowing the company to defer payment while using the purchased materials or inventory. Payment terms and due dates are outlined in agreements or invoices, and failing to meet them may result in penalties, interest charges, or strained supplier relationships.
Bills payable is an older term, and is more commonly found in the English system of accounting than the American system.
Bills Payable vs. Accounts Payable
Bills payable refer to the actual invoices sent to you by suppliers for amounts due, while accounts payable refers to the general ledger account in which the obligations associated with these bills is stored. There are usually many bills payable stored within the accounts payable account, while there is only one accounts payable account.
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Terms Similar to Bills Payable
Depending upon usage, bills payable is also known as accounts payable, trade payables, and notes payable.