Accounts Payable

State whether Accounts Payable is increased, decreased, or not affected

Bought inventory on credit
➛ Increased

Paid supplier in cash
➛ Decreased

Purchased equipment using a bank loan
➛ Not affected | creates Notes Payable

Paid electricity bill
➛ Decreased | if previously payable

Received goods with invoice due in 30 days
➛ Increased

Indicate whether Accounts Payable is debited or credited

Buying supplies on credit
➛ Credit Accounts Payable

Paying a supplier
➛ Debit Accounts Payable

Returning goods to a supplier
➛ Debit Accounts Payable

Recording a supplier invoice
➛ Credit Accounts Payable

1. Purchased office supplies worth $600 on credit



2. Paid $400 to a supplier



3. Bought inventory $1,200, half cash and half on credit

Classify each as Accounts Payable, Notes Payable, or Not a Liability

Supplier invoice
➛ Accounts Payable

Bank loan agreement
➛ Notes Payable

Salaries owed to employees
➛ Accounts Payable

Owner investment
➛ Not a Liability

Utility bill unpaid
➛ Accounts Payable

A stationery shop buys goods worth $8,000 from a supplier on credit. The supplier allows payment within 60 days.

Questions

What account is created by this transaction?
➛ Accounts Payable

Is it a current or non-current liability?
➛ Current liability

What journal entry is recorded at purchase?


What happens to Accounts Payable when payment is made?
➛ Accounts Payable decreases (debited); Cash decreases (credited)

Where does this appear in the financial statements?
➛ Balance Sheet ➧ Current Liabilities

What is Accounts Payable?
➛ Money owed to suppliers for goods or services purchased on credit

Is Accounts Payable an asset or a liability?
➛ Liability

Accounts Payable usually earns interest.
➛ False

Which document creates Accounts Payable?
➛ Supplier invoice

Where does Accounts Payable appear in the balance sheet?
➛ Current Liabilities section

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Notes Payable ➧ Here