Accounts payable
Money your business owes to suppliers for goods or services already received but not yet paid. Accounts payable sits on the balance sheet as a current liability until each bill is settled.
Also: creditors
Accounts payable (AP) is the running total of what your business owes to suppliers. When a bill arrives — a £1,200 invoice from your IT contractor, a £340 invoice from your stationery supplier — it enters AP the moment it is recognised in your books, regardless of when you actually pay. It is a current liability on your balance sheet, and it stays there until the payment clears and you allocate it against the bill in Xero.
In Xero, AP lives in the Bills section. Each bill you enter creates a credit to accounts payable and a debit to the relevant expense account. When you record the payment, the debit reduces the bank balance and the credit removes the liability. If you pay £900 against a £1,200 bill, the remaining £300 stays open in aged payables until you settle it or raise a credit note.
Why it matters for month-end
An accurate AP figure keeps your balance sheet honest. Unposted bills mean costs are understated, VAT reclaims may be missed, and reported profit is overstated. At month-end, a quick review of the aged payables report in Xero flags any bills sitting open longer than their terms — a sign of a missing payment, a duplicate entry, or a supplier dispute that needs resolving before the books can be closed.