Accounts Payable Journal Entry is Debit the Purchase/Expenses Account and Credit the Accounts Payable. Accounts Payable represents the amount your business owes to suppliers or creditors for goods or services received but not yet paid for. Recording an Accounts Payable transaction involves recognizing the liability when the invoice is received and then reducing it when the payment is made.
Initial Accounts Payable Journal Entry
Let’s assume your business receives goods worth $15,000 from a supplier on August 1, 2024, and agrees to pay within 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-01-2024 | Inventory (or Expense) | 15,000 | |
| 08-01-2024 | To Accounts Payable | 15,000 |
Explanation:
- Inventory (or Expense) is debited to recognize the value of the goods received. If you’re recording a service, the relevant expense account (like Office Supplies or Services Expense) would be debited instead.
- Accounts Payable is credited to reflect the liability your business now has to the supplier.
Payment of Accounts Payable
Now, let’s assume your business pays the $15,000 owed on August 30, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-30-2024 | Accounts Payable | 15,000 | |
| 08-30-2024 | To Cash | 15,000 |
Explanation:
- Accounts Payable is debited to eliminate the liability since the payment is made.
- Cash is credited to record the outflow of cash from your business.
Example Scenarios for Accounts Payable
Example 1: Office Supplies Purchase
Your business receives office supplies worth $2,000 on September 10, 2024, with payment due in 15 days.
Journal Entry (September 10, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09-10-2024 | Office Supplies Expense | 2,000 | |
| 09-10-2024 | To Accounts Payable | 2,000 |
Payment Journal Entry (September 25, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 09-25-2024 | Accounts Payable | 2,000 | |
| 09-25-2024 | To Cash | 2,000 |
Example 2: Raw Materials Purchase
Your manufacturing business purchases raw materials worth $25,000 on October 1, 2024, with payment terms of 30 days.
Journal Entry (October 1, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 10-01-2024 | Raw Materials Inventory | 25,000 | |
| 10-01-2024 | To Accounts Payable | 25,000 |
Payment Journal Entry (October 30, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 10-30-2024 | Accounts Payable | 25,000 | |
| 10-30-2024 | To Cash | 25,000 |
Example 3: Professional Services Invoice
Your business receives a $5,000 invoice for legal services on November 15, 2024, with payment due in 10 days.
Journal Entry (November 15, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 11-15-2024 | Legal Fees Expense | 5,000 | |
| 11-15-2024 | To Accounts Payable | 5,000 |
Payment Journal Entry (November 25, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 11-25-2024 | Accounts Payable | 5,000 | |
| 11-25-2024 | To Cash | 5,000 |
Example 4: Equipment Purchase
Your business buys equipment worth $50,000 on December 1, 2024, with payment due in 45 days.
Journal Entry (December 1, 2024):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 12-01-2024 | Equipment | 50,000 | |
| 12-01-2024 | To Accounts Payable | 50,000 |
Payment Journal Entry (January 15, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-15-2025 | Accounts Payable | 50,000 | |
| 01-15-2025 | To Cash | 50,000 |
Example 5: Purchasing Inventory on Credit
Your retail business purchases inventory worth $30,000 on January 5, 2025, with payment terms of 60 days.
Journal Entry (January 5, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-05-2025 | Inventory | 30,000 | |
| 01-05-2025 | To Accounts Payable | 30,000 |
Payment Journal Entry (March 5, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-05-2025 | Accounts Payable | 30,000 | |
| 03-05-2025 | To Cash | 30,000 |
Example 6: Office Furniture Purchase
Your business purchases office furniture worth $10,000 on February 1, 2025, with payment due in 45 days.
Journal Entry (February 1, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 02-01-2025 | Office Furniture | 10,000 | |
| 02-01-2025 | To Accounts Payable | 10,000 |
Payment Journal Entry (March 18, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-18-2025 | Accounts Payable | 10,000 | |
| 03-18-2025 | To Cash | 10,000 |
Example 7: Software Subscription Invoice
Your business receives an invoice for an annual software subscription worth $7,500 on March 10, 2025, with payment due in 30 days.
Journal Entry (March 10, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-10-2025 | Software Subscription Expense | 7,500 | |
| 03-10-2025 | To Accounts Payable | 7,500 |
Payment Journal Entry (April 9, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-09-2025 | Accounts Payable | 7,500 | |
| 04-09-2025 | To Cash | 7,500 |
Example 8: Marketing Services Invoice
Your business receives an invoice for marketing services worth $12,000 on April 15, 2025, with payment due in 15 days.
Journal Entry (April 15, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-15-2025 | Marketing Expense | 12,000 | |
| 04-15-2025 | To Accounts Payable | 12,000 |
Payment Journal Entry (April 30, 2025):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-30-2025 | Accounts Payable | 12,000 | |
| 04-30-2025 | To Cash | 12,000 |
Conclusion
Accounts Payable entries are essential for tracking the obligations your business has to its suppliers or creditors. By properly recording these transactions, you maintain accurate financial records and ensure that liabilities are paid off in a timely manner.