This article will give you a comprehensive answer to the question of what Accounts Payable Definition?
Accounts Payable Definition
This is directly opposite of what accounts receivable is. According to Webster’s New Universal Unabridged Dictionary, Accounts payable is a liability to a creditor carried on open account, usually for purchases of goods and services; Thus in 1935-40.
When the company receiving the goods does not sign a promissory note, the invoice will be recorded by the company in its liability account as Accounts Payable as well as Trade Payable. Unlike account receivable, accounts payable is a liability which means that it must have a credit balance. When an account payable is paid, Account payable will be debited and cash will be credited. Thus the records of credit balance in account payable should be equal to the number of vendor invoices recorded but not yet paid.
The person in charge of account payable could be referred to as accounts payable in as much as the person posses the vendor invoices and as well pays the company’s bills. Directly or indirectly whenever the supplier delivers service without receiving payment will phone and demand to speak with “Accounts payable.”
The account payable process is a functional department of accounting that reviews a huge amount of details to ensure that they are accurate in entering the amount into the accounting system. Before they conclude the entries, they may have to look at purchase orders issued by the company, contracts held by the company and other agreements, invoices from the company’s vendors and the received reports issued by the company.
Accounts Payable Process
Like I said earlier that the accounts payable process or function is immensely important, this is because it comprises all payment records of the company aside from the payroll. Furthermore, the accounts payable process may be carried out by an accounts payable department for a large corporation or by a small staff in a medium-sized business or equally a bookkeeper or even the business CEO.
The company’s size should not be equated with the mission of accounts payable as it is discharged at paying only the company’s bills and invoices that are legitimate and accurate. Thus, the invoice must reflect what the company had ordered, received, with proper unit cost and calculations before a vendor’s invoice will be entered into the accounting records and schedules for payments.
However, the accounts payable process must be efficient and accurate to produce accurate financial accounting for the company. You never can tell what will cause double-entry accounting. You might omit a vendor invoice, thereby making the accounts reports inaccurate.