A payable is a liability that appears on the balance sheet that shows the amount of money a business owes to another entity. The money can be owed toward a loan that the business took out, or items that were purchased on account. Payables can either be paid back in one lump sum or in many small payments through financing, depending on the agreements made with vendors upon purchase.
Short-term payables are to be paid within one year of the date they were created and appear under the heading “Current Liabilities” on the balance sheet according to generally accepted accounting practices. These types of payables are commonly labeled “Accounts Payable” or can be listed as individual and specific payable accounts. Short-term payable accounts are for items that are purchased for the company such as supplies, inventory, services or other short-term expenses.
Long-term payables take more than one year to pay off. They appear under the heading “Long-Term Liabilities” on the balance sheet. These commonly appear as “Notes Payable” or “Bonds Payable” but can also have their own specific entries. Long-term payables are often linked to some type of financing for the company such as a loan or the selling of bonds. Companies also have interest expense, or financing expense, along with most long-term payables because of the longer payment period.
Past Due Payables
This is a rare type of payable that starts out as a current liability. It occurs when you purchase items on account and can’t pay it back. When you can’t secure the financing needed to make a timely payment on the payable, set up a payment plan with the company you have an account with to make payments on the payable, if they agree to it. This can turn your current liability payable account into a long-term payable account depending on the terms of the payback agreement.