What is the term for money a business owes to its suppliers for purchases on credit?

Money a business owes its suppliers for credit purchases is called accounts payable.

Accounts payable, often abbreviated AP, is a liability recorded when a company receives goods or services from a supplier but has not yet paid the related invoice. A retailer, for example, may receive inventory today and agree to pay the wholesaler 30 days later. Until payment is made, the amount remains an outstanding payable on the balance sheet.

The term is broader than unpaid inventory invoices alone. Trade payables commonly relate to physical goods, while expense payables can involve services or operating costs such as advertising, utilities, travel, or office supplies. The accounting department typically records, approves, and schedules these invoices for payment.

Accounts payable is often confused with accounts receivable, which is money customers owe the business. Notes payable usually involves a formal debt instrument, while accrued expenses are costs recognized before an invoice has been received. Businesses may use a “three-way match,” comparing the purchase order, receiving record, and supplier invoice before approving payment.