![]() The goods that are not merchandise are the goods that the business does not normally deals in.Ĭompanies mostly find it convenient to record an accounts payable liability when they actually receive the goods. Merchandise are the commodities that a business normally deals in. Trade accounts payable are the obligations for the purchase of goods that are merchandise inventory whereas other accounts payable are the obligations for the purchase of goods (including services) that are not merchandise in nature. When the balance sheet is drawn, the balance shown by this account is reported as current liability.Īccounts payable are usually divided into two categories – trade accounts payable and other accounts payable. Accounts payable account is credited when something is purchased on credit and debited when a payment is made to a creditor or supplier for a previous credit purchase (see rules of debit and credit). Since this account is a liability account, its normal balance is credit. In general ledger an account titled as “accounts payable account” is maintained to keep record of increases and decrease in accounts payable liability during a period. Accounts payable usually appear as the first item in the current liabilities section of a company’s balance sheet. These are short term obligations which arise when a sole proprietor, firm or company purchases goods or services on account. Accounts payable (also known as creditors) are balances of money owed to other individuals, firms or companies.
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