Accounts Payable Journal Entry
As stated earlier, “Accounts Payable” refers to the accounting entry that shows a current liability payable to the supplier of goods and services for goods supplied or services rendered.
Although in large organizations, the Procure to Pay accounting process begins when the purchase order for the supply of goods is handed over to the supplier. To simplify things at the beginning, we will discuss the main accounting entries related to the accounts payable process.
Receipt of goods:
You issue a purchase order to the supplier and he delivers the goods to you. Once ownership of the goods passes to us from the supplier, we book the goods as our inventory and, based on the invoice received from the supplier, we must create a liability for the payment due to him. At this stage the accounting entry is:
Debit inventory account
Credit Accounts Payable
Make payment to supplier:
Once the invoice payment is released, the funds are released from the bank or treasury and the amount due to the supplier is canceled. For this part the accounting entry is:
Debit Accounts Payable
Cash credit/bank account