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Accounts Payable

Accounts payable represent trade accounts payable that exist based on the good faith credit of suppliers. This means that evidence of the obligation's existence comes from regular invoices rather than requiring the purchaser to sign a formal note. Accounts payable arise due to a lag in time between purchases of merchandise, supplies or services and payment for them. The selling party will outline credit terms for the transaction, which are usually stated in terms of sale and purchase. For example, 2/10, net 30 refers to the common credit term read 'two-ten, net 30' and meaning that a two percent discount is available on the balance if it is paid within 10 days of the invoice date, and the balance of the invoice is due within 30 days. Further details for accounting for accounts payable can be found under purchases