| While learning accounting basics you need to | | | | suppliers provide certain discounts in case the |
| understand different accounting concepts. One of | | | | debt is covered earlier before the due date. |
| them is accounts payable, which is explained in this | | | | Practical Examples |
| article and supported by practical examples for | | | | First question of course what accounting entries |
| better understanding. | | | | have to be made when accounting for the this |
| The Essence | | | | item of balance sheet. Let assume that on |
| So what is accounts payable? In case a business | | | | October 10, 2009 the company HCC acquired |
| acquired from the suppliers goods or services, | | | | goods from its supplier for $1500 on credit, |
| however cash for the acquisition based on the | | | | payment for which will have to be made till |
| agreement with the supplier will be paid later on | | | | November 10, 2009. To account for the |
| after the purchase, the purchaser acknowledges a | | | | acquisition we made the following entry: |
| liability to the supplier. Such liability is called | | | | D Inventory $1500 |
| Accounts Payable. This is a debt of the business | | | | ___C Accounts Payable $1500 |
| to its suppliers for certain acquisitions, like goods | | | | When till November 10, 2009 the payment is |
| or services. Usually when the goods or services | | | | made, the following entry will be recorded: |
| are acquired from the suppliers and the payment | | | | D Accounts Payable $1500 |
| is postponed till the certain date, we call it | | | | ___C Cash $1500 |
| "acquisition on credit." | | | | Since this balance sheet item account is a liability |
| On the balance sheet this item is reflected on the | | | | account, all the increase in this account are |
| Liabilities & Equity side under liabilities caption. | | | | reflected on the credit side, all the decrease - on |
| Usually they have their due date, i.e. the date till | | | | the debit side. The account will have credit closing |
| which the debt should be paid back. Sometimes | | | | balance. |