Accounts Payable Journal Entry – Accounts

Accounts Payable Journal Entry

Accounts Payable Journal Entry arises when a  business, purchases certain goods or avails certain services, like maintenance, rent, housekeeping, stationery, carriage in respect of trading goods etc. on a future payment basis. When each of these goods are purchased in cash, the business does not have any liability towards the provider or seller of such goods or services.




However, incase such a purchase is made/services are availed, for which payment  is to be made after the date when these goods are provided/service obtained, a liability is raised in favor of the person who has provided such goods/ services. The credit  balance table to such a person is generally referred to as an accounts payable.  Accounts Payable  or Trade Payables is a current liability account.

The journal entry for accounts payable, in respect of various expenses are as under : –

Accounts Payable Journal Entry  for  Credit Purchases of goods

Question 1: 

What would be the Journal Entry for Purchase of goods amounting to Rs. 10,000 from ABC Co. on credit ?

Explanation:

Since Purchase of goods is an expense, so, Purchases A/c would be debited, because according to the Rules of Debit and Credit, an expense A/c is debited .

Further , on   Purchases of goods  in Credit from ABC Co., the company incurs a liability towards ABC Co. or in other words the liability of the company is increased.

When a  liability is  increased, the liability   account is credited ,   as according to the Rules of Debit and Credit,   an increase in liability account is credited.

Hence the  entry would be as under  :

Purchase A/c Dr. 10,000

To ABC Co. A/c 10,000

Accounts Payable Journal Entry  for  Wages

Question 2 :

What would be the Journal Entry for Wages payable to workers amounting to Rs. 1,125  ?

Explanation:

Since Wages payable to workers is an expense, so, Wages A/c would be debited, because according to the Rules of Debit and Credit, an expense A/c is debited .

Further , on   Wages payable to workers, the company incurs a liability towards workers on account of amount payable, or in other words the liability of the company is increased.  When a  liability is  increased, the liability   account is credited ,   as according to the Rules of Debit and Credit,   an increase in liability account is credited. Accordingly, Wages Payable Account, which is an Account Payable would be credited.

Hence the  entry would be as under  :

Purchase A/c Dr. 1,125

To Wages Payable  A/c 1,125




Accounts Payable Journal Entry for  Interest on Short term Loan

Question 3 :

What would be the Journal Entry for Interest on Loan , due on loan, where interest   amounts to Rs. 10,000   ?

Explanation:

Since Interest payable to lenders is an expense, so, Interest A/c would be debited, because according to the Rules of Debit and Credit, an expense A/c is debited .

Further , on    Interest payable to lenders, the company incurs a liability towards lenders on account of amount payable, or in other words the liability of the company is increased.  When a  liability is  increased, the liability   account is credited ,   as according to the Rules of Debit and Credit,   an increase in liability account is credited. Accordingly, Outstanding Interest on Short Term Loan, which is an Account Payable would be credited.

Hence the  entry would be as under  :

Interest  A/c Dr. 10,000

To Outstanding Interest on Short Term Loan   A/c 10,000

Accounts Payable Journal Entry for  Office expenses

Question 4 :

What would be the Journal Entry for office expenses (these could be any expenses like Rent, Maintenance, Stationery, Telephone or any other similar expenses) 10,500 , where such expenses   amounts to Rs. 10,500  ?

Explanation:

Since office expenses (like Rent, Maintenance, Stationery, Telephone or any other similar expenses) is an expense A/c, so, office expense A/c would be debited, because according to the Rules of Debit and Credit, an expense A/c is debited . (We can replace the name of the ” office expenses” which such expense in the accounting entry).

Further , when such expenses incurred and the company does not pay the amount upfront to the provider of service,    the company incurs a liability towards  service providers,  on account of amount payable, or in other words the liability of the company is increased.  When a  liability is  increased, the liability   account is credited ,   as according to the Rules of Debit and Credit,   an increase in liability account is credited. Accordingly,  ” office expenses payable ” account  would be credited.




Hence the  entry would be as under  : –

Office expenses   A/c Dr. 10,500

To Office Expenses payable A/c 10,500

We can similarly Pass an entry, for any other type of office expense which is payable. For example, the accounting entries for various expenses will be as under : –

Rent Payable

Rent  A/c Dr. 10,500

To Rent payable A/c 10,500

Telephone expenses Payable

Telephone expenses A/c Dr. 10,500

To Telephone expenses payable A/c 10,500

Maintenance Expenses Account  Payable

Maintenance Expenses A/c Dr. 10,500

To Maintenance Expenses payable A/c 10,500

Printing and Stationery Accounts  Payable

Printing and Stationery  A/c Dr. 10,500

To Printing and Stationery payable A/c 10,500




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