Is Accounts Payable a Debit or Credit? All You Need To Know

In the world of business accounting, knowing how to record transactions the right way is key. One area that often confuses people is accounts payable (AP). Many ask, “Is accounts payable a debit or credit?” This blog will break that down in a way that’s simple to understand—even if you’re new to accounting.

We’ll explain what AP is, how it works, and why understanding debits and credits is important. You’ll also learn how AP fits into double-entry bookkeeping, how it shows up on the balance sheet, and how it affects your company’s money flow.

What is Accounts Payable?

Accounts payable is the money a company owes to its suppliers or vendors for goods or services it has received but hasn’t paid for yet. In simple terms, it’s a kind of short-term debt. For example, when a business receives an invoice from a supplier and agrees to pay it later, that amount goes under AP.

AP is listed under the liabilities section of the balance sheet because it represents money the business needs to pay. Examples of AP include:

• Unpaid utility or internet bills
• Amounts owed for office supplies
• Short-term debts like vendor payments

These are all part of regular business operations and are usually paid within 30 to 90 days.

How Accounts Payable Works

The AP process usually follows this flow:

1. The business places a purchase order
2. It receives the goods or services
3. The supplier sends an invoice
4. The business records the invoice processing
5. Payment is made within the set time

Managing accounts payable properly helps companies keep a good relationship with suppliers and manage their cash flow better. It’s also important to know that accounts payable is the opposite of accounts receivable, which is money owed to the business by its customers.

Debits and Credits in Accounting

To understand AP fully, you need to know how debits and credits work in the double-entry bookkeeping system.

Basics of Double-Entry Accounting

In double-entry accounting, every financial transaction affects at least two accounts. One side is a debit, and the other is a credit. The basic formula is:

Assets = Liabilities + Equity

This means everything the company owns (assets) must be balanced by what it owes (liabilities) and the value of the owner’s interest (equity).

General Rules for Debits and Credits

Here’s a simple breakdown:

• Assets (like cash or inventory): Debit increases, Credit decreases
• Liabilities (like accounts payable): Credit increases, Debit decreases
• Equity & Revenue: Credit increases, Debit decreases
• Expenses: Debit increases, Credit decreases

These rules help keep the accounting equation in balance and ensure proper financial reporting.

Is Accounts Payable a Debit or Credit?

Now to the main question: Is accounts payable a debit or credit?

Accounts Payable as a Liability

Accounts payable is a liability, so it follows the rules for liabilities. That means:

• When a new invoice is received, AP is credited (it increases the amount owed).
• When a payment is made, AP is debited (it decreases the amount owed).

So, to answer clearly:
Accounts payable is normally a credit.

Practical Examples

Let’s look at two examples to see this in action:

Example 1: Recording an Invoice

A company gets an invoice for $1,000 worth of inventory. The journal entry would be:

• Debit: Inventory or Expense account – $1,000
• Credit: Accounts Payable – $1,000

This increases both inventory (an asset) and AP (a liability).

Example 2: Paying the Invoice

The company pays the supplier $1,000. The journal entry would be:

• Debit: Accounts Payable – $1,000
• Credit: Cash or Bank – $1,000

This reduces both the liability and the company’s cash.