Accounts Payable: An Introduction To Accounts Payable

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1.0 INTRODUCTION TO ACCOUNTS PAYABLE Accounts payable is an accounting entry that represents an entity's obligation to pay off a short term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities. Accounts payable are often referred to as "payables". Another common usage of accounts payable refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors. Testing accounts payable provides evidence about the most significant current liability of many companies. Commonly called "trade payables" when the obligation is related to acquisition of goods for resale or manufacture. Accounts payable are debts that must be paid off within a given period of time in order to avoid default. For example, at the corporate level, AP refers to short-term debt payments to suppliers and banks.…show more content…
At the household level, people are also subject to bill payment for goods or services provided to them by creditors. For example, the phone company, the gas company and the cable company are types of creditors. Each one of these creditors provide a service first and then bills the customer after the fact. Each demands payment for goods or services rendered and must be paid accordingly. If people or companies don't pay their bills, they are considered to be in default. Accounts payable reference the obligations to vendors for purchases of inventory, supplies, or services on credit. Purchases related to accounts payable may be reported at the gross method or the net method. When testing accounts payable, assertions about purchases and cost of goods sold are also
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