A brief description on accounts payable

Accounts payable occurred when a company procured some goods or raw materials from a seller on credit. So, on credit means the company opts for late payment within a stated duration.

When a company purchases products on credit, the accountant makes the entry of the same amount as a credit on accounts payable ledger.

And here the seller has to keep these sales under accounts receivable ledger in the balance sheet.

Not only companies but people also purchase services & goods on credit. For example, we are using cable services, water, house, electricity etc. and paying the bill on next month.

Let’s take an example:

A shopkeeper purchased products from a regular wholesaler and he paid half of the amount and other half payment in credit.

So, the rest amount will put as accounts payable in the balance sheet.

Accounts payable & accounts receivable are different. When a supplier owes money to a company, then its called accounts receivable.

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