When goods are purchased on credit from a supplier the amount owing to the supplier is recorded as an accounts payable. Subsequently 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.
To illustrate, as an example suppose a payment of 3,000 is made to a supplier using cash.
How do you show the Accounts Payable Payment?
The accounts payable transaction is shown in the accounting records with the following bookkeeping journal entry.
| Account | Debit | Credit |
|---|---|---|
| Accounts payable | 3,000 | |
| Cash | 3,000 | |
| Total | 3,000 | 3,000 |
Accounts Payable Payment Journal Explanation
As can be seen the journal entry shown above comprises a single debit entry and a single credit entry. Each entry represents one side of the transaction and therefore one side of the accounting equation as follows.
Debit
Firstly the debit to accounts payable shows the reduction in the liability to the supplier.
Credit
Finally the credit shows that cash went out of the business with the payment of the supplier.
The Accounting Equation
The Accounting Equation, Assets = Liabilities + Equity means that the total assets of the business are always equal to the total liabilities plus the total equity of the business It is important to realize that this is true at any time and applies to each and every transaction. In this case the following table shows the accounting equation for the transaction.
In this case one asset (cash) is reduced by the payment of 3,000, and on the other side of the equation, the liabilities to the supplier (accounts payable) are reduced by the same amount.
Popular Double Entry Bookkeeping Examples
Finally the above journal entry is one of many examples of bookkeeping. You can discover another by following the links shown below.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.