Accounts Payable T Account

Here we will study about Accounts Payable T Account or Ledger in Accounting.

                 You may also be interested in “Accounts Receivable T Account or Control Ledger”

As we already know that Accounts Payable or Creditor is the amount payable by the business to suppliers or creditors for the goods purchased of credit basis or received services on account. It is the Current Liability as it is payable the business during the Accounting Cycle or Current Accounting Period.

Accounts Payable T Account or Control Ledger is the account in which all the Business Transactions related to Accounts Payable / Creditor are finally recorded after transferring Accounting Journal Entries from Each Individual Suppliers or Accounts Payable Subsidiary Journal to Accounts Payable Subsidiary Subledgers or Subsidiary Ledgers at the end of accounting period.

For the New Entrepreneur, there is no Opening Balance of Accounts Payable since it is just started the business. The Closing Balance is Transferred to Balance Sheet On Liabilities & Equity Side Under Current Liabilities Section.

For Example, in the Year 2017, if the company (ABC) purchased goods worth Rs. 50000 From Mr. A (Supplier), then the following Accounting Journal Entry is passed in the book of Company ABC as shown below:

                              Purchases a/c 50000

                                                       Accounts Payable (Mr. A) 50000                          

                                      (Purchased Goods Worth Rs. 50000 From Mr. A On Credit)

When the payment for goods purchased is made within the time specified for making payments, then following Accounting Journal Entry is passed in the Journal of Company:

                           Accounts Payable (Mr. A)  50000

                                                                   Cash a/c  50000

(Cash Paid for Goods Worth Rs. 50000 purchased on Credit From Mr. A)

Suppose if Some goods purchased are found defective or damaged or unsatisfactory, then in this case, the company returned the goods to supplier. Suppose, the company found two products defective (Each Cost 1000) and record the following Accounting Journal Entry in its Book:

                        Accounts Payable a/c 2000                             

                   

                                                            Purchases Return a/c 2000

(Goods Returned To Supplier (Mr. A) Due To Defective Or Unsatisfactory Condition)

Sometimes, if the payment is made before due date, then the supplier gives the discount on the amount of goods purchased as a reward. This Discount Received is a revenue for the company and (Discount Allowed) expense for the supplier. Suppose that the supplier allowed 2% Discount allowed on the amount of goods purchased, then in that case, the following Accounting Journal Entry is passed in the Company’s Journal as shown below:

            Accounts Payable (Mr. A) 48000               

                                           

                                                  Cash a/c 46040

                                                  Discount Received 960 (2% X 48000) 

(Cash Paid and Discount Received on Good Worth Rs. 50000 Purchased From Mr. A)

All these Transaction are recorded in Accounts Payable Journal, then transferred to Accounts Payable Ledger as shown below:

ABC Company

Accounts Payable

For The Year 2017

                                     Rs.                                                                       Rs.

                                                                                        Purchases       50000

Purchase Return         2000

Discount Received      960

Cash                           46040

Balance c/d                50000

In the Next Year, this closing balance becomes the opening balance for 2018 and in the same way all business transactions related to Accounts Payable are recorded and transferred to the Journal of Accounts Payable / Creditor.

So, it is all about Accounts Payable T Account or Ledger in Accounting.