PAYABLE ACCOUNT

When a organisation purchases goods or services in advance of paying for them, we will say that the company is purchasing the goods or service   on credit term. The supplier (seller) of the goods on credit is also recognised to as a creditor. If the buyyer receiving the goods does not sign a promissory note, the supplier's bill or invoice will be recorded by the organisation in its liability account Accounts Payable or Trade Payables.

An accounting entry that is  represented an entity's obligation to pay off a short-term debt entry to its creditors. The accounts payable entry is found on a statement of financial position under the heading current liabilities.

Accounts payable is the certain amount of an entity's short-term obligations to pay seller for products and services which the entity purchased on credit from seller. If accounts payable are not paid within the payment date  to with the seller, the payables account are considered to be in default, which may be triggerd a penalty or interest payment method, or the revocation or curtailment of additional credit term from the seller.

It is a liability account, Accounts Payable will normally have a credit balance. Hence, when a buyyer invoice is recorded, Accounts Payable will be creditedentry and another account must be debited entry . When an account payable(buyyer) is paid, Accounts Payable will be debited entry and Cash will be credited entry. Therefore, the credit balance in  Payable account should be equal to the amount of buyyer invoices that have been recorded but have not yet been paid.

Under the accrual concept of accounting method, the organisation receiving goods or services on credit term must be reported the liability account no later than the date they were received. The same date is used to record the debit  to an expense account or asset account as appropriate. Hence, accountants say that under the accrual concept of accounting expenses are reported when they are incurred.

The  account term payable can be also refered to the person or staff that processes seller invoices and pays the organisation's bills. That's why a seller who hasn't received payment from a buyyer will phone and ask to speak with "accounts payable."

The  payable accounts process involves are reviewing an enormous amount of detail to ensure that the legitimate and accurate amounts are entered in the accounting system. Much of the information that is needed to be reviewed will be found in the following information:

    purchase orders issued
    receiving reports
    invoices from the organisation's
    contracts and other aggriment

The accuracy and completeness of a company's  statements of financial position are dependent on the  payable account . A well-run accounts payable account  will include:

    the timely processing of accurate and legitimate seller invoices,
    accurate adjustment in the appropriate general ledger , and
    the accrual of obligations and expenses account that have not yet been completely processed.
When personal accounts payable are recorded in jeneral ledger, this may be called in a payables ledger, thereby keeping a large number of personal transactions from cluttering up the general books. Alternatively, if there are few payables, they may be recorded directly in the general books. Accounts payable ledger appears within the current liability section of an entity's financial statement