What is AP in financial business plan? It is account payable. That's the simple answer. As a new accountant, you need to understanding the meaning of AP because you will come across it when ever you are writing a business plan on any type of business. It is also very important because it is highly needed in the cash flow analysis in a financial computation. The accountant must know when A/P increases in cash inflow or when A/P decrease in cash outflow and vise versa. Now lets look at the definition of AP - Accounts Payable.
THE DEFINITION of 'Accounts Payable - AP' - From Account Dictionary and other books
AP is an accounting entry that represents an entity's
obligation to pay off a short-term debt to its creditors. The accounts
payable entry is found on a balance sheet under the heading current
liabilities.
Accounts payable are often referred to as "payables".
Secondly, another common usage of AP refers to a business department or
division that is responsible for making payments owed by the company to
suppliers and other creditors.
SEE HOW INVESTOPEDIA EXPLAINS 'Accounts Payable - AP' FOR A BETTER UNDERSTANDING
According to Invespedia; Accounts Payable (AP) are debts that must be paid off within a given
period of time in order to avoid default. For example, at the corporate
level, AP refers to short-term debt payments to suppliers and banks or borrowers.
Please note that Payables are not limited to corporations. At the household level,
people are also subject to bill payment for goods or services provided
to them by creditors. For example, the phone company, the gas company
and the cable company are types of creditors. Each one of these
creditors provide a service first and then bills the customer after the
fact. The payable is essentially a short-term IOU from a customer to the
creditor.
Each demands payment for goods or services rendered and must be paid
accordingly. If people or companies don't pay their bills, they are
considered to be in default.