Bills payable is an amount a business owes a supplier or creditor for goods or services it has already received, carried as a current liability. In US practice that balance is normally booked and reported as accounts payable, so bills payable reads as a legacy or non-US label for the same thing. Two narrower readings also travel under the term. One is a liability under a bill of exchange the business has accepted, an order to pay drawn on it by the supplier, which is a question about an instrument rather than about the ledger. The other, in bank finance, is a bank’s own short-term borrowings from other banks, which sit on the bank’s own balance sheet rather than in a client’s books.
The first reading is the one a US firm meets in a client’s books, and it does not get its own balance sheet caption. On a balance sheet filed under Regulation S-X those amounts sit inside the current liability line item headed accounts and notes payable (17 CFR 210.5-02), and the counterparty breakdown inside that line is set out in accounts payable.
What Separates It From Accounts Payable
Most of the time, nothing. A ledger that carries a bills payable balance is carrying what a US chart of accounts would call accounts payable, and a client using the older label is describing supplier balances rather than a different kind of liability.
Where the term is used precisely, it narrows. It points at the payables the business has accepted an instrument for, rather than at the ordinary open invoices that make up the rest of the balance.
What Separates It From Notes Payable
The document each one rests on, and who wrote it. A note rests on a written promise the business itself signs. An accepted bill rests on a bill of exchange, an order to pay that the supplier draws on the business, and the business signs its agreement on the draft.
That signature has a defined meaning. Acceptance means the drawee’s signed agreement to pay a draft as presented, it has to be written on the draft, and it may consist of the drawee’s signature alone (Uniform Commercial Code (UCC) 3-409(a)). The drawee is the party the order is addressed to, and once it accepts, it is obliged to pay the draft according to the terms in force at the time of acceptance, with separate rules where the acceptance varies those terms or completes an incomplete instrument (UCC 3-413(a)). The written-promise test that makes a balance a note instead is worked through in accounts payable and notes payable and bank notes payable.
Recording a Bill Payable
Say a client buys inventory on credit, then accepts a draft the supplier draws for the same amount, and pays it at maturity.
The supplier's invoice is recorded
Debit Inventory 18,000
Credit Accounts payable 18,000
The supplier's draft is accepted, 90 days
Debit Accounts payable 18,000
Credit Bills payable 18,000
The draft is paid at maturity
Debit Bills payable 18,000
Credit Cash 18,000Nothing is bought and nothing is expensed at the middle step. It relabels a balance the client already owed, and fixes a date it now has to be cleared by.
Common Questions
No. It is a liability, an amount the business owes, so it sits on the liability side of the balance sheet and normally inside current liabilities. The asset with the matching name belongs to whoever holds the instrument, not to the business that has to pay it.
One instrument read from two sides. The business that accepted the bill carries it as bills payable, and the party entitled to collect on it carries the same amount as bills receivable. The wider version of that split, which side of the ledger each lands on and why the two never net together, is in payable vs receivable.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can run a block of its own payables work through a trial task before anything client facing depends on it.
