Accounts Payable Journal Entry

Accounts Payable Journal Entry

Although in the large organizations the Procure to Pay Accounting process starts when the purchase order for supply of goods is released to the supplier. To keep things simple in the beginning we will discuss the core accounting entries related to the Accounts Payables process.

Accounts Payable Journal Entry

As discussed earlier “Accounts Payable” refers to the accounting entry that indicates a short term liability payable to the supplier of goods and services for the goods supplied or services rendered.

Although in the large organizations the Procure to Pay Accounting process starts when the purchase order for supply of goods is released to the supplier. To keep things simple in the beginning we will discuss the core accounting entries related to the Accounts Payables process.

Receipt of Goods:
You issue purchase order to the supplier and he supplies you with the goods. Once the ownership of the goods gets transferred from the supplier to us, we account for the goods as our inventory and based on the invoice received from the supplier need to create a liability for the payment due to him. At this stage the accounting entry is:

Debit    Inventory Account
Credit   Accounts Payable Account

Making Payment to the Supplier:
Once the payment for the invoice is released then funds gets released from the bank or cash and the amount due to the supplier gets knocked off. For this part the accounting entry is:

Debit     Accounts Payable Account
Credit   Cash/Bank Account

Accounts Payable Journal Entry

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Creation Date Sunday, 15 April 2012 Hits 58268 Accounts Payable, AP, AP Cycle, AP Process, Finance, Functional Knowlede

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