Accounts Payable
Definition: Amounts owed to suppliers
Scope:BroadDifficulty:Very Easy
Amounts owed to suppliers
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Purchase on credit | ||
| Buy $6,000 inventory on account. | ||
| Merchandise InventoryAsset+ | $6,000 | |
| Accounts PayableLiability+ | $6,000 | |
| Liability created; payment deferred per credit terms. | ||
| 2. Pay within discount (2/10, n/30) | ||
| Pay $6,000 invoice in 10 days; 2% discount = $120. | ||
| Accounts PayableLiability− | $6,000 | |
| CashAsset− | $5,880 | |
| Merchandise InventoryAsset− | $120 | |
| Discount reduces inventory cost (perpetual/net method). | ||
| 3. Pay after discount period | ||
| Pay $6,000 invoice after 30 days. | ||
| Accounts PayableLiability− | $6,000 | |
| CashAsset− | $6,000 | |
| Full amount paid; discount forfeited. | ||
| 4. Return goods to supplier | ||
| Return $800 of defective inventory. | ||
| Accounts PayableLiability− | $800 | |
| Merchandise InventoryAsset− | $800 | |
| Liability and inventory both decrease. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Merchandise InventoryAsset account — goods purchased for resale. Under the perpetual method, credits reduce inventory when goods are sold.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$6,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$120.00
$800.00
$5,080.00
Accounts PayableAccounts PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$6,000.00
$6,000.00
$800.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$6,000.00
Normal bal. ▶
$6,800.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$5,880.00
$6,000.00
$11,880.00
DurationShort-Term
Related Reports
- Balance Sheet(Primary — Current liability)
- Aged Accounts Payable Report(Primary — Detail by aging)
Related Subjects
See Also
- CashPaired in entry: Pay supplier
- Purchase DiscountsPaired in entry: Record purchase discount taken
External Links
- Accounts payable — Wikipedia