Meaning of accounts payable.

Not always does a company make upfront payments for the material (raw material etc.) it buys, accounts payable is essentially the amount owed by an organization for the purchase of raw materials etc.

Accounts Payable can be found under the “Current Liabilities” heading of the Liabilities section of the balance sheet. It is also commonly referred to as “Payable”. The organizations which give credit are commonly referred to as “Sundry Creditors”.

During the time of making an invoice, such payable are recorded under the ledger head of “Accounts Payable”

Commonly seen accounts payable are for advertising, travel, office supplies etc.

Accounts payable are not only for corporations, they can also be seen in common households. Examples of such payable in households include electricity/telephone bills etc.

Accounts payable is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents.

An accounts payable is recorded in the Account Payable sub-ledger at the time an invoice is voucher-ed for payment. Voucher-ed, or vouched, means that an invoice is approved for payment and has been recorded in the General Ledger or AP sub-ledger as an outstanding, or open, liability because it has not been paid. Payable are often categorized as Trade Payable, payable for the purchase of physical goods that are recorded in Inventory, and Expense Payable, payable for the purchase of goods or services that are expenses. Common examples of Expense Payable are advertising, travel, entertainment, office supplies and utilities. A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received. Suppliers offer various payment terms for an invoice. Payment terms may include the offer of a cash discount for paying an invoice within a defined number of days. For example, 2%,30 Net 31 terms mean that the payer will deduct 2% from the invoice if payment is made within 30 days. If the payment is made on Day 31 then the full amount is paid.

For example :-
We purchased goods from BM Bros. on credit for Rs. 10000.

The entry would be passed:

BM Bros A/c Dr.
To Accounts Payable A/c

Here liability is increase and equity is decrease because we have to pay the outstanding amount, on the payment the entry will be:

A/c Payable Dr.
To Cash/ Bank A/c
 
Not always does a company make upfront payments for the material (raw material etc.) it buys, accounts payable is essentially the amount owed by an organization for the purchase of raw materials etc.

Accounts Payable can be found under the “Current Liabilities” heading of the Liabilities section of the balance sheet. It is also commonly referred to as “Payable”. The organizations which give credit are commonly referred to as “Sundry Creditors”.

During the time of making an invoice, such payable are recorded under the ledger head of “Accounts Payable”

Commonly seen accounts payable are for advertising, travel, office supplies etc.

Accounts payable are not only for corporations, they can also be seen in common households. Examples of such payable in households include electricity/telephone bills etc.

Accounts payable is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents.

An accounts payable is recorded in the Account Payable sub-ledger at the time an invoice is voucher-ed for payment. Voucher-ed, or vouched, means that an invoice is approved for payment and has been recorded in the General Ledger or AP sub-ledger as an outstanding, or open, liability because it has not been paid. Payable are often categorized as Trade Payable, payable for the purchase of physical goods that are recorded in Inventory, and Expense Payable, payable for the purchase of goods or services that are expenses. Common examples of Expense Payable are advertising, travel, entertainment, office supplies and utilities. A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received. Suppliers offer various payment terms for an invoice. Payment terms may include the offer of a cash discount for paying an invoice within a defined number of days. For example, 2%,30 Net 31 terms mean that the payer will deduct 2% from the invoice if payment is made within 30 days. If the payment is made on Day 31 then the full amount is paid.

For example :-
We purchased goods from BM Bros. on credit for Rs. 10000.

The entry would be passed:

BM Bros A/c Dr.
To Accounts Payable A/c

Here liability is increase and equity is decrease because we have to pay the outstanding amount, on the payment the entry will be:

A/c Payable Dr.
To Cash/ Bank A/c

Hey friend, thanks for the information and it is really going to help many people. Well, as we know that accounts payable are amounts a company owes because it bought products or services on credit from a provider or supplier. For more detailed information, please download my presentation.
 

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