When making a partial payment on an outstanding liability, the journal entry reflects the liability reduction and cash outflow. Here’s how to record such a transaction:
Scenario:
A company has an outstanding liability of ₹100,000 to a supplier. The company makes a partial payment of ₹40,000.
Journal Entry for Partial Payment:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-01 | Accounts Payable A/c | 40,000 | |
| To Cash/Bank A/c | 40,000 | ||
| (Being partial payment made to supplier) |
Explanation:
- Accounts Payable A/c is debited to reduce the liability by the amount of the partial payment.
- Cash/Bank A/c is credited to reflect the cash outflow.
Example with Different Details
Scenario: A company owes ₹200,000 to a vendor and makes a partial payment of ₹80,000.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-01 | Accounts Payable A/c | 80,000 | |
| To Cash/Bank A/c | 80,000 | ||
| (Being partial payment made to vendor) |
Adjusting the Remaining Balance
After recording the partial payment, the remaining balance of the liability needs to be correctly shown in the books.
Calculation for Remaining Balance:
- Original liability: ₹200,000
- Partial payment: ₹80,000
- Remaining liability: ₹200,000 - ₹80,000 = ₹120,000
This remaining liability will continue to be shown in the Accounts Payable account until fully settled.
By recording partial payments accurately, the company ensures that its financial records properly reflect its current liabilities and cash flows, maintaining an accurate financial position.
