The accounting treatment for accounts payable (also known as trade payables) involves recording a liability that represents the amount owed to suppliers or creditors for goods or services received. Here is the typical journal entry for accounts payable:
When recording a purchase on credit:
- Debit the relevant expense or inventory account.
- Credit the accounts payable account.
Example:
Date Particulars Debit (₹) Credit (₹) ------------------------------------------------------------------------ 2024-06-06 Purchases A/c 50,000 To Accounts Payable A/c 50,000 (Being goods purchased on credit)When making a payment to the supplier:
- Debit the accounts payable account.
- Credit the bank or cash account.
Example:
Date Particulars Debit (₹) Credit (₹) ------------------------------------------------------------------------ 2024-06-15 Accounts Payable A/c 50,000 To Bank A/c 50,000 (Being payment made to supplier)When there are discounts or adjustments:
- Debit the accounts payable account.
- Credit the discount received or adjustment account.
Example (assuming a discount received):
Date Particulars Debit (₹) Credit (₹) ------------------------------------------------------------------------ 2024-06-20 Accounts Payable A/c 50,000 To Bank A/c 49,000 To Discount Received A/c 1,000 (Being payment made to supplier with discount)For GST Input Tax Credit (if applicable):
- Debit the GST Input Tax Credit account.
- Credit the accounts payable account.
Example:
Date Particulars Debit (₹) Credit (₹) ------------------------------------------------------------------------ 2024-06-06 Purchases A/c 45,000 GST Input Tax Credit A/c 5,000 To Accounts Payable A/c 50,000 (Being goods purchased on credit including GST)
These entries help in maintaining accurate records of liabilities and expenses, and ensure compliance with accounting standards and tax regulations in India.
