Accounts Payable

Also known as: AP · bills payable · outstanding expenses

Definition

Accounts payable (AP) is money you owe to others — suppliers, contractors, software subscriptions — for goods or services you've received but haven't paid for yet.

Detailed Explanation

For freelancers, AP typically includes: software subscriptions (Adobe CC, Figma, hosting), contractor payments (a subcontractor you hired for a project), equipment purchases on payment plans, and unpaid supplier invoices. Tracking AP helps you understand your true financial position — your profit isn't just income minus paid expenses, it's income minus ALL obligations including unpaid ones. Good bookkeeping separates AP from already-paid expenses so you know what's still outstanding.

Freelancer Example

A freelance videographer pays monthly subscriptions for Adobe Creative Cloud ($54.99), Dropbox ($11.99), and Vimeo ($20). These recurring AP items are tracked and categorized as Tools & Software expenses. They also receive an invoice from a subcontractor for $600 — recorded as AP until the payment is made.

Related Terms

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