Accounts Payable Tips
The Process of Accounts Payable
When an entity is obligated to pay a short-term debt to its creditors, after receiving goods or services in advance, this condition is referred to as accounts payable, and, in accounting, the amount of accounts payable is entered into under the heading current liabilities. Accounts payable is better understood in this: when a company orders and receives goods (or services) in advance of paying for them, that company is purchasing goods "on account" or "on credit.," and the vendor's bill or invoice will be recorded by the company in its liability account titled Accounts Payable.
So, when a vendor's invoice is recorded, the amount of accounts payable will be credited, and to balance this, another account must be debited. The value of accounts payable is entered into the debit column and Cash will be credited when the account payable is paid, and, therefore, the credit balance in accounts payable becomes equal to the amount reflected in the vendor's invoice which has already been recorded but have not been actually paid yet.
The term accounts payable can also refer to the person or staff that processes vendor invoices and pays the company's bills.
There are other short-term debts that may be referred to, aside from accounts payable, and they are: payroll costs, business income taxes and short-term loans. On the other hand, long-term debts include lease payments, retirement benefits, individual notes payable and a range of other debts repaid over a long term.
There is a slightly differentiation between the terms accounts payable to trade payable, such that trade payable constitute all the money a company owes the vendors when it buys business supplies and materials are included in the company's inventory, go here to know more!
The opposite of accounts payable is accounts receivables, which is the money that is owed to a company.
In the process of accounting for accounts payable, an enormous amount of detail must be reviewed to ensure that only legitimate and accurate amounts are entered in the accounting system, and the following documents are considered for review: purchase orders issued by the company, receiving reports issued by the company, invoices from the company's vendors, contracts and agreements. For more facts about accounts payable, visit this website at http://www.ehow.com/how_7621913_learn-accounts-payable.html.
The accuracy and completeness of a company's financial statements are dependent on the accounts payable process, thus a well-run process must include the following: the timely processing of accurate and legitimate vendor invoices, accurate recording in the appropriate general ledger accounts, and the accrual of obligations and expenses that have not yet been completely processed.
With business process automation or accounts payable automation software, the time needed to process an invoice has been drastically reduced in managing accounts payable and has helped a lot in the accurate reporting process. The good thing about this Broniec Associates accounts payable automation software is that there will never be another misplaced invoice and payable is routed accordingly and instantaneously.