Account Payable Law and Legal Definition
Account payable means a debt payable by a person or company to a creditor, or an enterprise in the normal course of its business. Account payable is usually maintained in the form of a file or statement of account. Generally, when a bill is received from a supplier or creditor, it is added to the account payable and removed from it when the amount is paid. For example: bills obtained for goods or services received and not yet paid. The account payable of a household usually consists of ordinarily bills from the electric company, cable television, telephone company, or satellite dish service, newspaper subscription, and other such regular services. It is also known as payables, note payable, or trade payable.
Account payable also refers to a business unit, department, or division that manages the payment of debt owed by the company to suppliers and other creditors. The functions of accounts payable unit includes authorizing purchase orders, collecting credit card receipts, organizing account withdrawals, keeping the general ledger, auditing expense reports, and managing accounts receivable and payroll.
In Midrex Corp. v. Lynch, 50 N.C. App. 611, 614 (N.C. Ct. App. 1981), the court observed that the term "accounts payable" does not include: reserves, secondary liabilities or contingent liabilities except upon satisfactory showing that the taxpayer will actually be compelled to pay the debt or liability; taxes of any kind owing by the taxpayer; debts owed to a corporation of which the taxpayer is parent or subsidiary or with which the taxpayer is closely affiliated by stock ownership or with which the taxpayer is subsidiary of same parent corporation unless the credits created by such debts are listed if so required by law for ad valorem or property taxation, for taxation at the situs of such credits; or debts incurred to purchase assets which are not subject to taxation at the situs of such assets. The term "accounts payable" shall be deemed to include current notes payable of the taxpayer incurred to secure funds which have been actually paid on his current accounts payable within 120 days prior to the date as of which the intangible tax return is made."
