What are accounts payable?

Accounts payable refer to the obligations a business has to pay its creditors for goods or services received but not yet paid for. Specifically, they represent the amounts a company owes to suppliers for products or services that have been delivered but not yet paid for, usually within a short timeframe. This is typical for businesses engaged in operations that require credit from suppliers, allowing them to receive inventory or services upfront with the obligation to settle the bill later.

Choosing the option that defines accounts payable as unwritten promises to pay is accurate because it reflects the nature of these obligations: while they are typically documented through invoices and accounts, the fundamental nature of accounts payable relies on the trust that the business will fulfill its obligation to pay when due. Unlike immediate cash inflows, physical bills, or cash reserves, accounts payable focus on the liabilities incurred, making this definition the most appropriate.