Similarities & Differences Between Accounts Payable And Expenses With Relationship

Accounts Payable / Sundry Creditors And Expenses

Accounts Payable And Expenses

Accounts Payable is a Current Liability as it is the amount of dues payable by the business to its vendors, suppliers or creditors for the goods or services purchased on account or credit during the accounting cycle in order to finance the business and to run it while Expenses are the costs incurred for the purpose of earning revenue for the business. These are necessary in order to run the daily business operations and incurred to meet obligations for the period.


Accounts Payable / Sundry Creditor is recorded on the Balance Sheet as it is a Permanent Account while expenses are recorded on Income Statement or Trading & Profit And Loss Account as these are Temporary Accounts.



There are different types of accounts payable such as Trade Payable, Non Trade Payable, Loans Payable, etc., while expenses are mainly divided into two types named as Direct Expenses and Indirect expenses.



Similarities Between Accounts Payable And Expenses


Both are used to run the business successfully.

Both are the parts of Financial Statements and reported to the Users of Financial Statements as being the important elements of Financial Reporting.


Relationship Between Accounts Payable And Expenses



There is a strong relationship exists between accounts payable and expenses as when the business has not sufficient amount of cash to purchase or buy services, then it purchased goods or services on account from vendors or suppliers and then there is a need to sale these goods or services, the business incurs expenses in order to meet obligation such as accounts payable and current liabilities. So, both of these two accounts are interact with each other during the accounting cycle and used to run the business successfully with stability, if these are utilized properly.



For example, if a business did not meet obligations i.e., then, the business operations would fail at the end and if the business did not incur expenses, then it would fail to generate sales which ultimately close down the business due to lack of sufficient amount of revenues to pay out debts (e.g., making payment to suppliers, etc.) on time.

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