Accounts Payable


What is accounts payable?

Accounts payable is the balance owed by the entity to its suppliers in respect of purchase of goods and services on credit.

Accounting for Payables

Accounts payables balance is affected by the amount of credit purchase, sales tax, discount received, purchase returns and the payments to suppliers.

Credit Purchase

As credit purchase results in increase in the expense and liabilities of the entity, expense must be debited while accounts payable must be credited.

Therefore in case of a credit purchase, the following double entry is recorded:

DebitPurchases (Income Statement)
CreditPayable

When the payable is paid his due, the payable balance will be reduced to nil. The following double entry is recorded:

DebitPayable
CreditCash/Bank