Lessons · Accounting · buying on account and the payable
Buying on account: the payable
When the business gets something now and pays later, record what it got now and a liability called accounts payable: Dr the thing received, Cr Accounts payable.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
What it is for
The supplier drops off 900 of stock with an invoice due in thirty days. The stock is on the shelf today, the debt exists today, and the books have to say both before any cash moves.
How to think about it
Ask what arrived: goods, an asset, or a service already used, an expense. Debit that. Credit accounts payable for the same amount. The payment is a separate entry on a separate day.
Worked example
Dr Inventory 900 / Cr Accounts payable 900Stock arrived on credit. An asset up, a liability up.
Dr Repairs expense 300 / Cr Accounts payable 300A repair done and invoiced, not yet paid. An expense up, a liability up.
Accounts payable balance = 900 + 300 = 1,200 CrWhat the business owes its suppliers today.
Your turn
A 450 electricity bill arrives and is not yet paid. Write the credit line.
Dr Electricity expense 450 / Cr 450
Solve one, graded on the server
The trap
Waiting until the bill is paid to record it. The electricity was used this month, so the expense belongs to this month, whichever month the cash leaves.