The Process of Accounts Payable


Accounts payable is an accounting entry that stands for an entity’s obligation to pay off a short-term debt to its creditors, and since it is an entry, on the balance sheet accounts payable appears under the heading current liabilities.  Another way of understanding accounts payable is when a company orders and receives goods (or services) in advance of paying for them, that company is purchasing goods “on account” or “on credit.,” and the vendor’s bill or invoice will be recorded by the company in its liability account titled Accounts Payable.

As soon as the vendor’s invoice is recorded, the amount representing accounts payable at will be entered as credit and for it to be balanced, another account must be debited.  The value of accounts payable is entered into the debit column and Cash will be credited when the account payable is paid, and, therefore, the credit balance in accounts payable becomes equal to the amount reflected in the vendor’s invoice which has already been recorded but have not been actually paid yet.

Another common use of accounts payable audit is referred to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

Accounts payable are basically a short-term debt, but there are also other short-term business debts, which includes payroll costs, business income taxes and short-term loans.  On the other hand, long-term debts include lease payments, retirement benefits, individual notes payable and a range of other debts repaid over a long term. Visit this website at and know more about accounts payable.

Trade payable is more long-term than accounts payable, because it refers to all the money a company owes the vendors for the business supplies and materials, which is included in the company’s inventory.

The difference between accounts receivables to accounts payable is that in accounts receivables it refers to the money that is owed to a company.

In the process of accounting for accounts payable, an enormous amount of detail must be reviewed to ensure that only legitimate and accurate amounts are entered in the accounting system, and the following documents are considered for review: purchase orders issued by the company, receiving reports issued by the company, invoices from the company’s vendors, contracts and agreements.

Through an accurate and detailed accounts payable process, the company’s financial statements are described as also accurate and complete, and this can be achieved if the process is well-run, following these procedures: the timely processing of accurate and legitimate vendor invoices, accurate recording in the appropriate general ledger accounts, and the accrual of obligations and expenses that have not yet been completely processed.

To be able to maintain an accurate reporting of the accounts payable process, recently, business process automation, specifically accounts payable automation software, has been introduced, which has reduced dramatically the time needed to process an invoice.  Another benefit of accounts payable automation software is that there won’t be any misplaced invoice anymore and payable is directed instantaneously and accordingly.