Accounts Payable Questions And Answers




Here we discuss about Accounts Payable Questions And Answers.





Is Accounts Payable An Asset or Liability


Accounts Payable Questions And Answers
No, Accounts Payable is not an Asset. Basically, when Entrepreneur buys goods on credit from the suppliers or sellers of the goods, then the amount that is payable to suppliers within the specified period of time creates a Liability for the firm. This Liability is called Current Liability or Accounts Payable as it is payable within Accounting Cycle or Accounting Period. So Accounts Payable is  a Current Liability and not an asset.


You may also be willing to Read “Accounts Receivable Questions And Answers

Is Accounts Payable A Liability or Expense


Accounts Payable is not an expense because it is amount payable by the business to supplier or seller of goods at some future date within accounting cycle or current Accounting Period.

Expenses are paid for the purpose of producing revenue. When Expenses paid liabilities are decreased. For Example, if an entrepreneur paid its electricity bills of Rs.90000 during the current month, then its liability decreases and expenses are increased.

Following Accounting Journal Entries are passed:

When expenses for electricity bill are not paid, then liability is increased by Rs.9000 and following Accounting Journal Entry is passed:


1.     Expenses - Electricity Bills a/c    90000

                                                      Electricity Bill Payable a/c  90000

When the amount of bill is paid in Cash during the Current Accounting Period, then following Journal Entry is passed:

2.      Electricity Bill Payable a/c   90000

                                              Cash a/c  9000

As we the business paid the liability, so we reverse the above entry no. 1 to write off the liability account:

3.      Electricity Bill Payable a/c   90000

                                             Expenses - Electricity Bill a/c  90000

You may also be interested in Adjustments in Final Accounts.


So, now, hopefully, you will be able to better understand that Accounts Payable is Current Liability and not an Asset or Expense.

Comments