Accounts Payable Journal Entries

Common Mistakes To Avoid

Do you know the most common accounts payable journal entries mistakes business owners make and how you can avoid it?

Tracking liabilities is crucial for businesses to calculate equity and avoid overextending themselves. You will need to make  journal entries anytime anything is purchased on credit or owed to a supplier. Unfortunately, business owners often make expensive miscalculation errors, because they don’t understand the fundamentals of accounts payable. Understanding the process of making journal entries for accounts payable reduces this risk.


You need to make entries carefully to keep track of your expenses and liabilities. Here are some common bookkeeping mistakes people make when recording their accounts payable.

 Accounts Payable Journal Entries

According to GAAP principles, every transaction requires both a debit and a credit. Unfortunately, many business owners aren’t familiar with these practices and neglect to record transactions needed to reflect changes in the values of either assets or liabilities. They may record a debit entry for the new assets purchased on credit, but neglect to record a credit entry for the liabilities.

This omission can cause them to overlook liabilities down the road. Creating a credit entry for accounts payable helps you keep track of your debts to ensure they are paid.

Neglecting to Close Accounts Payable

Many Santa Rosa small business owners forget to create an entry to close their account payable. A couple of problems could arise from this:

·        You end up paying bills multiple times.

·        You overestimate your cash reserves.

You always need to make an entry anytime a transaction is made. Fortunately, the entries to close an account payable are very straightforward, as illustrated in the table below.

Debit                                                       Credit

 Accounts Payable    
                                                     Cash

Review your financial records regularly in case you neglected to make a journal entry after paying a bill. You will want to make an entry immediately to avoid forgetting again, which prevents you from paying the bill more than once or overdrawing your checking account.

Failing to Date Entries

Recording dates for all journal entries is very important. Make sure all bills are paid by specified deadlines to avoid late fees, supplier complaints, potential litigation and other issues from arising. Dating your accounts payable journal entries makes it easier to keep track of them and make payments on time.

Listing Accounts With $0 Balances

Under GAAP standards, it is customary not to list accounts with $0 balances on your balance sheet. It is prudent to remove any accounts from your balance sheet after they have been paid. Doing so keeps the document less cluttered and avoids creating confusion that could lead to paying bills multiple times.

Forgetting to Reflect Changes in the Balance Sheet

I frequently notice that Santa Rosa business owners without a bookkeeping background often record their accounts payable in the ledger, but neglect to carry those transactions to their balance sheet. Recording liabilities in the balance sheet is extremely important to keep track of your overall debts. The ledger entries are only the first step in the process, so make sure to review your ledgers to update your balance sheet on a regular basis.

Assuming All Debits Reference Assets

Many business owners believe that all debit entries reference changes in assets.  Entries are  also needed for  business expenses, such as an upcoming electric bill or payments owed to a contractor. Some people only make entries after purchasing a tangible asset on credit, which causes them to lose track of their outstanding liabilities.

Should you need any further help on how to avoid these common mistake on accounts payable journal entries, please do not hesitate to use our bookkeeping services.

Accounts Payable Articles

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Read Accounts Payable and the Self Employment Tax in Santa Rosa 

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Read how A/P Affect Cash Flow

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Read A/P Journal Entries for Growing Businesses in Santa Rosa 

Find out about the A/P Spreadsheet

Read about Auditing Accounts Payable Santa Rosa

Learn about Bookkeeping Services and Accounts Payable 

Read about Calculating A/P

See Examples of an Accounts Payable Journal Entry 

Find out about Ideal Accounts Payable Turnover 

Learn about how to Improve Accounts Payable Turnover 

Read Santa Rosa Accounts Payable and Minimum Wage Increases

Find out about Streamlining Accounts Payable Santa Rosa



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