Accounts Payable Journal Entry : Here, I explain Account Payable Journal Entry and what is account payable and how to make accounts payable journal entry. So, lets understand what is accounts payable.

Accounts payable journal entry

Introduction to Accounts Payable :

Accounts Payable a liability to a creditor, carried on open account, usually for purchase of goods and services.

When company orders and receives goods (or service) in advance of paying for them, we say that the company is purchasing the goods on account or on credit . The supplier or vendor of the goods on credit is also refers to as a creditor, the vendor bill or invoice will be recorder by the company in it is liability account, accounts payable (or trade payable).

As is expected for liability account, accounts payable will normally have a credit balance. Hence, when a vendor invoice is recorder, accounts payable will be credited and another account must be debit (As required by double –entry accounting). When an accounts payable is paid, accounts payable will be debit an cash will be credit therefore , the credit balance in accounts payable will be debit an cash should be equal to the amount of vendor invoice that have been recorded but have not yet been paid.

Under the accrual method of account the , the company receiving goods or services on credit must report the liabilities no later than the date they were received. The similar date to record the debit entry to an expense or asset account as the appropriate. Hence, accountants say that under the accrual method of accounting expanses are reported what hey are incurred (not when they are paid).

The account payable process involves reviewing an enormous amount of detail to ensure that only legitimate and accurate amounts are entered in the accounting system. Much of the information that need to reviewed. Will be set up in the follow documents :

    Purchase order issued by company

    Receiving reports issued by the company.

    Invoices from the company vendors

    Contracts and other agreements.

The accuracy and completeness company financial statements are dependent on the accounts payable process and make accounts payable journal entry. The accounts payable process will include :

 Timely processing of accurate and the legitimate vendor invoices.

Accurate recording in the appropriate general ledger accounts, and the accrual of obligation and expenses that have not yet been completely processed.

The efficiency and effective of the accounts payable process will also affect the company’s cash position and relationship with it is suppliers.

lets understand Accounts Payable Journal Entry

Accounts Payable Journal Entry :

Question 1 :

Accounts Payable Journal Entry for credit purchase of goods.

Lets understand the concept of Accounts payable journal entry for credit purchase of goods.

For Example :  You started business and your company require some goods (Material).  You purchased of goods amount is Rs 75,000 from Reliance co. on credit.

Note : You have not paid cash , you purchased goods on credit. So at this scenario as per the Golden Rules of Accounting, if the liability is  increased. Hence,  liability account is credited and increase in liability account is credited.

So the Journal entry would be as under :

Purchase A/c  Dr.  75,000

To Reliance co. A/c    75000

Question 2 :

Accounts payable Journal Entry for salary :

Lets understand the concept of  Accounts payable journal entry for salary.  Salary payable to employee is an company expanse, salary A/c would be debited, according to golden rules of accounts.

For example : You are company owner so you have pay salary to employees , what would be the journal entry for salary payable to employee amount  to  Rs. 95,000.

Solution : The company incurs a liability towards employees on account of amount payable, so liability of the company is increase. As per golden rules of accounting, if the liability is increase, the liability account is created. So which is account payable would credited.

So the Journal entry would be as under:

Purchase A/c Dr. 95,000

To Salary Payable  A/c  95000

Question 3 :

Accounts Payable Journal Entry for interest of short term loan :

For example :  You have taken short term loan for your company and you have to pay interest on loan , due on loan, where interest amount  Rs, 9000.

What would be the journal entry ?

Solution :

Interest payable to lenders is an expense,  Interest A/c would be debited, as according to golden rules of accounting,  an expense A/c is debited .

Interest payable to lenders, the company incurs a liability towards lenders on account of amount payable, so  the liability of the company is increased.  When a  liability is  increased, the liability account is credited ,  an increase in liability account is credited. Hence, Outstanding Interest on Short Term Loan, so that  Account Payable will be credited.

So the Journal entry would be as under :

Interest  A/c Dr. 9,000

To Outstanding Interest on Short Term Loan   A/c  9,000

Question 4 :

Accounts Payable Journal Entry for office expense :

For example : You are company owner, you have office expenses  any expenses like Rent,  Stationery, Telephone or any other similar expenses) Rs. 75,000.

What would be journal entry of office expense ?

Solution :

Office expenses like Rent,  Stationery, Telephone or any other expenses,   is an expense A/c, so, office expense A/c would be debited, since according to golden rules of accounting, an expense A/c is debited . 

company incur a liability towards  service provider,  on account of amount payable, or so  the liability of the company is increased.  When   liability is  increased,  liability   account is credited ,   as per golden rules of accounting,  so increase in liability account is credited.  The office expenses payable  account  would be credited.

Journal entry for office expenses :

Office expenses   A/c Dr.  75,000

To Office Expenses payable A/c   75,000

Here, we do other pass journal entry, like other office expenses which is payable :

Printing and Stationery Accounts  Payable :

Printing and Stationery  A/c Dr. 75,000

To Printing and Stationery payable A/c 75,000

Rent Payable :

Rent  A/c Dr. 75000

To Rent payable A/c 75000

Go through of Accounts Payable  Process :

The accounts payable process or function is immensely important since it involves nearly all of a company payment outside of payroll. The accounts payable process might be carried out by an accounts payable department in the large corporation, by a small staff in a medium-sized company, or by a bookkeeper or possibly the owner in a little business.

Regardless of the company size, the mission of accounts payable is to pay only the company bill and invoices that are legitimate and accurate. This way that before a vendors invoice is enter into the accounting records and listed for payment, the invoice must changes :

   What the company has ordered

   What the company has received

   The proper unit costs, calculation, totals, terms, etc.

The maintain a company cash and other assets. Accounts payable process be supposed to have internal controls. A few reason for internal control.

    Prevent paying a fraudulent invoice

    Prevent paying an inaccurate invoice

    Prevent paying a vendor invoice twice.

Be certain that all vendor invoice are accounted.

Periodically companies should seek professional assistance to improve it is internal control.

Accounts payable process should also be able and accurate in order for the company’s financial statements to be correct and complete. Because of double-entry accounting an omission of a vendor invoice will actually cause tow accounts to report incorrect amounts.

For example : if a repair expense is not recorded in timely manner

1. the liability will be omitted form the balance sheet.

2. The repair expense will be omitted form the income statement.

 The vendor invoice for  repairing is recorded two times, that will  two problems as well.

1. The liabilities will be overstated, and

2. Repairs expense will be overstated.

In further words, lacking the accounts payable process person up to date and good run,  company management or other user of the financial statements will  getting bad feedback on the company performance as well as financial position.

The  badly run accounts payable process be able to also missing a discount for paying some bills before time. If vendor invoice are not paid when they become due, supplier relationships could be strained. This may lead to some vendors demanding cash on delivery. If that were to occur it could have extreme consequences for cash-strapped company.

Just as delays in paying bills cans cause problems, so could paying bill too soon. If vendor invoice are paid earlier than necessary, there may not be cash available to pay some other bills by their due dates.


We have explained about Accounts Process Journal Entry and Introduction of Accounts Payable and Accounts Payable Process. And those who searching accountant job, as soon as possible i will provide you interview question and answer and you can apply jobs naukri. com and I hope you understand how to make Accounts Payable Journal Entry .