Do Accounts Payable Go On An Income Statement?

outsourced accounting department

The short-term indebtedness or liability of a company toward its suppliers and other creditors is known as accounts payable. Considered current assets, accounts payable are a kind of receivables that must be paid generally within one year. The usual question that comes up is: do accounts payable show up on the income statement as we all know they are the expenses a firm will eventually have as debts.

Definition of income statement and working principles

Along with the amount of profit (or loss) generated over a specified period, an income statement shows a company's received and paid out amounts of money. Usually, the main line elements consist of:

Sales or service income shows the whole amount of cash a business makes from offers of services or commodities.

Among these are the direct expenses the company paid directly in the process of manufacturing or obtaining the goods or services it sold during the period of the statement: Cost of Goods Sold (COGS). This could cover raw material costs, staff salary, and pay, manufacturing overheads, and so forth.

Among other direct expenditures in the operations of the company, like rent, utilities, staff compensation, and marketing expenses, the cost of sales is handled as such.

Interest Payments


The total of all revenues earned from activities less all the expenses incurred in the process is net income/loss. This shows if the business either made any profit or rather lost within the period of shown performance.

As you can see, realizing revenues and the expenses being incurred in a period immediately concentrates on the income statement. AP balances do not fit these qualities.

Not the Income Statement; Accounts Payable Shows Up on the Balance Sheveler

Accounts payable are debts resulting from purchases of goods, supplies, tools, and services obtained from outside vendors for which a company has not yet paid. They reflect one in the future, not a real monetary expense previously paid for. They are an obligation. Accounts payable balances are not included in the income statement of a corporation as expenses.

Such amounts could be categorized as expenses and shown on the income statement of that period when the company pays the vendors who generated accounts payable. The $3000 outflow of cash might thus influence the income statement if, for example, a corporation had $5000 in accounts payable for the inventory during one period but cleared $3000 in the next quarter.

Stated differently, accounts payable balances are the accumulated expenses that might influence the corporate revenue statement following payment. However, as direct expenses or line items on an income statement, the accounts payable balances are not realizable. They are only numbers, where the business might have acquired the goods and/or services and not always paid the suppliers in cash.

Contact us here for Accounts Payable now!

Custom Accounting Solutions For Your Small Business

Contact Us Today