Accounts Payable Journal Entries With Examples In Accounting

Here we discuss about Accounts Payable Journal Entries With Examples in the Light of Accounting. 

Previously we studied about Accounts Receivable Journal Entries.

You may also be interested in Account Receivable VS Account Payable

First of all, we must know about Accounts Payable in order to better understand this topic.

Accounts Payable Definition

What is Accounts Payable and What does it mean in Accounting?

Accounts Payable or Creditors are the amounts due by the business to outsiders or to whom the company pays the payments for the goods or services purchased on Credit basis. These are Current Liabilities For the company as the company pays the bills to them in near future.

Creditors / Accounts Payable Accounting Journal Entries

Here are following Accounting Journal Entries For Accounts Payable in the book of company:

1. When Business Purchase Goods On Credit From Suppliers or Creditors

When goods are bought on Credit from Suppliers, Accounts Payable, the Accounts Payable is created for the business. The following Accounting Journal is passed in the book of Company:

Purchases a/c

                                                 Creditors / Accounts Payable a/c

For Example, if the company supplies goods worth Rs. 200000 From Supplier, Mr. A, then following Accounting Journal Entry is passed in the book of company:

Purchases a/c 300000

                                   Mr. A 300000

(Goods Bought On Credit From Mr. A)

2. When Goods Returned by business Suppliers due to Damaged or Unsatisfactory Conditions

For Example, if the company found that 2 quantity of goods Worth Rs. 2000 damaged or not to the requirement of the company needs or unsatisfactory condition, then company returned the goods to suppliers and it is called Return Outward or Purchase Return.

Mr. A 2000

                                         Purchase Return a/c 2000

(Goods Returned To Suppliers Due to Unsatisfactory Condition)

3. When the payment is made for the goods purchased or bought from Suppliers

In this case, if the company makes payment for the goods purchased from suppliers on the due date, then the following Accounting Journal Entry is passed in the book of Company:

Creditors / Accounts Payable a/c

                                                  Cash a/c

For Example, if the company makes payment of Rs. 300000 To its supplier (Mr. A) on due date, then following Accounting Journal Entry is passed in the book of company:

Mr. A    300000

                          Cash a/c  300000

(Payment To Suppliers (Mr. A) For the Goods Purchased On Credit)

4. If the company makes prompt payment to supplier before the due date , then if the suppliers can allow Purchase Discount to company

For Example, if the company makes prompt payment to Mr. A before the due date, then the supplier gives the 5% purchase discount of Total Purchased Price Rs. 300000 (5% X 300000 = Rs. 15000) and in this case following Accounting Journal Entry is passed in the book of company:

Mr. A 285000

                                                 Purchase Discount a/c 15000

                                Cash a/c 285000

(Payment To Suppliers At 5% Discount Before Due Date)

It is all about Accounts Payable Journal Entries With Examples In Accounting.