Internal controls for accounts payable are used to reduce the risk of fraud and error in the accounts payable process. The purpose of the internal controls is to ensure that only valid supplier invoices are paid.
The accounts payable control account is an account in the general ledger which maintains summary postings relating to accounts payables. The account, which is sometimes referred to as the purchases ledger control account, is used to allow the detail of supplier transactions to be kept in a separate subsidiary personal account ledger which is not part of the double entry bookkeeping system.
A business has been invoiced 500 for goods and takes a 2% cash settlement discount for early payment.
The original invoice would have been posted to accounts payable, so the balance before settlement on the suppliers account is 500. A 2% discount on 500 is 10, and the amount of cash the customer pays is therefore 490.
When goods are purchased on credit from a supplier the amount owing to the supplier is recorded as an accounts payable. When a payment is made to the supplier for the amount outstanding the payment of the liability is recorded using an accounts payable payment journal entry.
As an example suppose a payment of 3,000 is made to a supplier using cash.
When goods or services are purchased on account from a vendor, the invoice will stipulate the vendor invoice payment terms. These payment terms indicate when an invoice is to be paid.
For example, an invoice might stipulate payment terms net 90 or net 390 terms, which means that the full amount of the invoice is due for payment 90 days from the date of the invoice.
The accounts payable journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accounts payable.
In each case the journal entries show the debit and credit account together with a brief narrative.
Accounts payable are amounts which are owed by you to your suppliers for the purchase of trade goods or services, they are sometimes referred to as trade payable or trade creditors.
Accounts payable are recorded in the balance sheet of the business under the heading of current liabilities, that means they are payable within a year.