Accounting Demystified

Chapter 14. Accounts Payable

Accounts payable is a frequently used account—it is used whenever a company buys anything on credit. This might be inventory, office supplies, or equipment. When the merchandise is received, the company debits the appropriate account for whatever is received (Inventory if inventory was received; Office supplies if paper clips were received, and so on) and credits Accounts payable. When payment is made, the company debits Accounts payable (which reduces the amount owed—since the company is making a payment, it no longer owes that amount) and credits Cash. Let's use another example.

On August 23, 2002, the company receives office supplies purchased on credit:

On September 15, 2002, the company sends its payment for ...