Accounts payable under GAAP is governed by principles that sound abstract and become extremely concrete at a period end. Three of them do the work: accrual accounting, which says costs are recognised when incurred rather than when paid; matching, which says costs belong in the period of the benefit they relate to; and completeness, which says everything owed must be recorded. Together they produce the cut-off discipline that decides whether a set of accounts is right. This page explains the three in plain terms and where each one bites in practice. It describes general principles and is not accounting advice for your business, which is a question for your own accountants.
Accrual accounting: the payment date is irrelevant
A cost is recognised when the goods or services are received, not when the supplier is paid. This is the principle that makes the payables balance necessary at all, and it is the one small businesses moving from cash accounting find least intuitive.
Matching: the invoice date is also largely irrelevant
The cost belongs in the period whose revenue or activity it relates to. That is why an invoice arriving in February for goods received in January belongs in January, and why the arrival date of paperwork is the wrong organising principle for a payables process.
Completeness: the one auditors test
Everything owed at the period end must be recorded, including what has not been invoiced. This is where accruals come from and why the search for unrecorded liabilities exists. On the worked example on this site, $48,000 current, $21,000 at thirty days, $9,500 at sixty and $4,200 beyond is $82,700 owed, 42% of it overdue, with days payable outstanding of 30.26.
Questions people ask about accounts payable gaap
Does GAAP say how to age payables?
Aging is a management report rather than a presentation requirement. What is required is that the liability is complete and correctly classified, and the specifics are for your own accountants.
What if we use cash basis for tax?
Accounting method for tax is a separate question with its own rules; the IRS publishes guidance on accounting periods and methods. Your accountants should advise on your position.
Is this the same under other frameworks?
The accrual and completeness ideas are common across frameworks; the detail differs. If you report under something other than US GAAP, take advice on the specifics rather than assuming.