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Accounting Examples - Accounts Payable

 

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Accounts Payable:

When goods, services, or supplies are purchased on account, they become, to the purchaser, an account payable (to the supplier, they are an account receivable). For example, if Your Company purchases office supplies and agrees to pay the supplier at a later date, the amount due from that purchase is recorded in your books as an account payable. The journal entry below illustrates how an on-account purchase of $200 in office supplies would be recorded:

General Journal

Page: 1

Date

Account Titles/Explanation

Ref

Debit

Credit

20XX
Jan

5

Office Supplies

Accounts Payable

Bought office supplies on account.


 

200.00


200.00

When the account is paid, the following journal entry is made:

General Journal

Page: 1

Date

Account Titles/Explanation

Ref

Debit

Credit

20XX
Jan

15

Accounts Payable

Cash

Paid on account.


 

200.00


200.00

Accounts Payable, like all asset and liability accounts, is a permanent account. That is, it is not closed at the end of the period as are income statement accounts; its balance carries over from one period to the next. The account is also a balance sheet account. This means that it appears on the balance sheet along with all the other asset, liability, and equity accounts. An example of a balance sheet containing accounts payable can be examined here.

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