Accounts Payable – Meaning, Process, Formula & Journal Entries

If you consider a company, then the goods that the company is purchasing is given on credit which is needed to pay back in a short time. In accounts payable or AP, it is like an accounting entry which can represent the company’s obligation to pay the short-term debt to its creditors or even suppliers.

All these things appear on the balance sheet, and that to all those comes under the current liabilities. Apart from these all, it too refers to the business departments or even the division which is said to be responsible for all payments that are owned by the company to its suppliers or even to creditors.

Difference Between Payable Accounts and Accounts Receivable:

Accounts Payable Meaning

Many people can’t understand between the accounts payable and account receivable. In case of payable account, it is a liability account by which the company can record all the amounts that it have in pending to it suppliers or vendors for all types of services that they can receive on the basis of credit. But in case of accounts receivable, it is the asset account where the company can get all its amounts that needs to be get collected from the customers who all have received the goods or its services on the basis of credit.

Examples for payable account and account receivable

To make you understand these things, you can go through the example that is mentioned here. So, let us assume that there is a company, who sells all product to the other company which is B. the sell is given on credit. So company A will be keeping track of all the amount of the sale that it comes to Sales via credit basis and then it is been debited to Receivable accounts.

After all these, company Brand will keep the record of the purchase which comes with the credit to Account Payable. So the credit amount gets remitted, then B Company will get in debit form, and it is like the liability for payable accounts, and it will get credit cash. In short, it means that A company will be debiting some money and it will then credited to the Receivable asset Accounts.

How to Record Accounts Payable?

If you look at the accounting, then there are many companies which will now purchase all items on all Account. So when you see that term on Account and it can automatically trigger when there is an excellent transaction that occurs when the cash is not involved in the right way. You can understand it by taking an example of it.

Let us assume that on May 1st 2018, a company purchased computer accessories of about $1,000 that is on Account from the other company. By this, it means that the asset account, equipment and others have increased and also the liability account, accounts payable, and it also increased by $1000.

How to Record Accounts Receivables?

You can see that there are times when a company will then sell goods or even services on Account. All this means that there you can go for the transactions that occur when the cash is not get involved at all. You can get it cleared by going through the example. Let us assume that on May 2nd 2018, a company takes some office accessories for $300 on Account to another company. So if you look at the transaction, the accounts will become then receivable all the Account and it is increased near to $300, and then the office supplies will decrease by near to $300.

Difference Between Accounts Payable and Accounts Receivable:

When you go for Accounts receivable then it is said to be the total amounts owed to all company are by customers and in case of payable accounts are said to be the amounts by which the company has owes me to the suppliers. By this way, it leads to the number of accounts receivable and also it is payable for the entire routine which is done by comparing all the part of the liquidity analysis.

It also helps in providing the funds which come in from all receivables which can pay for all outstanding payables. You can get a great idea about it all by making the comparison, which is made with the current ratio, and it is through the quick ratio may also be used. They are mentioned below.

  • All the receivables are classified as the current asset and payables are classified as the current liability.
  • All the receivables are said to be involved in a single trade receivables account, and it comes as the non-trade receivables account. You can see that all the payables can even get compromised with accounts that include sales taxes payable, trade payables, interest payable and income taxes payable.
  • You can also see that receivables may also go for offsetting the allowance for all doubtful accounts, but in the case of payables, there is nothing like that for anyone.

Discounts on Accounts Payable vs Accounts Receivable:

The next important thing that one look for is about discounts. There are many companies who all attach the discounts wit accounts payable vs Account receivable Account. It helps in providing all incentive for the borrower, and it helps in paying back all the amount to receive the discount. If you take a look at the discount, then you can see that the discounts that the company receives with cash repayment will be smooth and companies require cash for all operating activities. For getting discounts, two notions are used. In the first notion, it is represented by X/10 or X/20. While in the second notion, you can see that it is represented by n/30.

Conclusion:

In the above content, you can see that all the essential information about the accounts payable are mentioned. By going through it, you can get some good idea about the differences that usually exist in between the accounts payable and accounts receivable. Hopefully, the article can help you in getting your doubts clear in a significant way and without much searching about the mentioned things.

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