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Accounts payable is a financial term that is used in reference to the obligation owed to repay a debt by either an individual or a business entity. The accounts payables process accesses the condition surrounding the debt and the methods for the repayment of the debt. A business may encounter the accounts payable process as a consequence of some of its business activities that may put it in a position of debt. In the case of an individual, the accounts payables process may be generated by the deliberate assumption of debt through personal activities or through the usual debt that accrue to individuals as a result of the consumption of materials like energy and the utilization of services like telephone and Internet connection.
In the application of the accounts payables process to a business, some companies may use different types of debt instruments as a means of generating capital. For example, a company that lacks enough funds might receive goods from a supplier on credit with the promise to repay the debt according to a structured agreement listing the date for the repayment and the amount that will be due on that date, including any applicable interest. Where this is the case, such an outstanding debt will be recorded by the company during its reconciliation as a liability due to the fact that it is a financial burden that the business must discharge. On the other hand, the same business might allow some of its customers to buy products on credit with a promise to pay for them later, according to an agreement between the company and the customer regarding the terms for repayment. In this instance, the debt will be recorded as an asset by the company due to the fact that it is expecting to be paid for a transaction that has been concluded.
The accounts payables process applies to individuals in various capacities, depending on the type of transaction that led to the generation of the accounts receivable in the first place. For instance, if the customer bought something from a business without paying, the customer will be obliged to pay back the debt in the manner that may have been stated by the business as a condition for granting the debt. Other costs like the payment of electricity bills are also a part of the accounts payables process for the individual and even the businesses.