Accounts payable for rental properties: what it is and when you need it
Accounts payable is the total of vendor bills you have received but not yet paid. A landlord who pays every bill the day it arrives never has any, and does not need it. You need it when a bill arrives on one date and you pay on another, because then the bill is something the property owes, and it belongs on the books as a liability until the money leaves the bank.
What accounts payable is, in plain words
A vendor finishes a repair on the 28th and sends a bill for $640 due in 30 days. You owe the money from that moment, even though nothing has left your bank account. Accounts payable (AP) is the name for that running total of unpaid bills. On the balance sheet it sits under liabilities, next to the loan and the tenants' security deposits.
It is an account in your books, not a bank account and not a payment method. The vendors are the creditors, and the AP balance is simply what you would owe them if you stopped today.
Do you need it on a small rental?
It depends on the accounting method and on your habits. Under the cash method you record an expense when you pay it. IRS Publication 538 says that under the cash method you generally deduct expenses in the tax year you pay them, so an unpaid bill is not a deduction yet. Under the accrual method you record the expense when you become liable for it.
Many small landlords keep cash-basis books for the tax return and still want to see what is unpaid. They do that with a bill list, which is accounts payable without the journal entry. The choice between the two is covered in cash vs accrual for rental property.
- You pay every bill within a day or two: skip AP and record the expense when you pay.
- You pay bills in a batch once or twice a month: keep a bill list so nothing is forgotten, and decide with your preparer whether to book them as AP.
- You have several properties or a lender who wants accrual statements: record each bill when it arrives and clear it when you pay.
The two entries: receive the bill, then pay it
With AP there are two steps, and each one has its own entry. When the bill arrives, the expense is recognized and the liability goes up. When you pay, the liability goes down and cash goes down. The expense is not touched a second time.
Example a made-up plumber bills $640 on March 28, due April 27. On March 28 you debit Repairs $640 and credit Accounts payable $640. On April 25 you pay it: debit Accounts payable $640, credit Checking $640. Check: the expense was counted once, in March, and the AP balance is back to $0.
| Date | Debit | Credit | What it means |
|---|---|---|---|
| March 28 | Repairs $640 | Accounts payable $640 | Bill received, you owe it |
| April 25 | Accounts payable $640 | Checking $640 | Bill paid, you no longer owe it |
The mistake to avoid is booking the expense again when you pay. If your bank feed shows the $640 leaving in April and you code it to Repairs, March and April both carry the cost. Match the payment to the open bill instead.
What does not go through accounts payable
- The mortgage payment. It is recorded from the lender statement as principal, interest and escrow (see recording a mortgage payment).
- Property tax and insurance paid from an escrow account. The lender pays them, so they follow the escrow entries.
- Credit card charges. The card is its own liability account, and you reconcile it to the statement. See credit card reconciliation for a rental business.
- Security deposits. They are a separate liability owed to tenants, not to vendors.
Keeping the balance honest
Once a month, list every open bill and check that the total equals the AP balance in your books. A difference means a bill was paid but never cleared, or entered twice. The IRS recordkeeping guidance says to keep the supporting documents for each entry, so attach the vendor's bill to the entry and keep the payment confirmation with it.
Before you pay, get a W-9 from any vendor you may need to report to the IRS. The steps are in collecting W-9s from vendors.
How DoorKeeping handles it
Each property in DoorKeeping has its own ledger, and the AI reads a vendor bill, suggests the expense category and the property, and puts it in front of you for approval before anything is recorded. Bills you have approved but not yet paid show as open, so you can see what each property owes. You pay from your own bank account. DoorKeeping gives no tax advice, so ask your preparer which method your return uses.
Sources
- IRS, Publication 538, Accounting Periods and Methods, read Oct 30, 2026
- IRS, Recordkeeping, read Oct 30, 2026
Questions
- Is accounts payable an asset or a liability?
- A liability. It is money the property owes to vendors for bills received and not yet paid, and it appears on the balance sheet next to loans and tenant security deposits.
- Can I deduct a repair bill before I pay it?
- Under the cash method you generally deduct an expense in the year you pay it, so an unpaid bill is not deducted yet. Under the accrual method it can be. Ask your preparer which method your return uses.
- Do I need accounts payable if I have one rental house?
- Usually not. If you pay each bill when it arrives, record the expense when you pay. A simple list of open bills is enough if you sometimes pay late.