What is Accounts Payable?

Accounts Payable Definition

Here we will study about Accounts Payable or Creditor Definition in Accounting.

                         

                             You may also be interested in “What is Accounts Receivable”

Accounts Payable means that the debt or obligation payable by the business to Supplier of the business or other Companies and Financial Institutions providing funds to company for the operation of Business.

Accounts Payable is the Current Liability which is payable by the business within the specified Accounting Period or Accounting Cycle.

We Credited Accounts Payable Account when it increases and debited when it decreases and Close or Clear Accounts Payable Account, when we fully paid to our suppliers or creditors for Goods Purchased on Credit or Account.

Example: If the business purchased goods worth Rs. 50000 From Supplier Mr. A (Accounts Payable), then Mr. A is the Accounts Payable for the business and the company is liable to pay the amount to Mr. A within the specified Accounting Cycle or Accounting Period.

In the above Business Transactions, two accounts are involved in it:

One is Purchases and other one is Accounts Payable or Creditor. We Record this Business Transaction in the form of Accounting Journal Entry in the Book of Company as shown below:

             Purchases a/c 50000             

                                 

                                             Accounts Payable a/c 50000

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

As Accounts Payable increases, so we credit it by Rs. 50000. while Purchases is direct expense which is also increasing so we debit it by Rs. 50000.

So, it is all about the question, “What is Accounts Payable?” in Accounting.