Accounts Payable Journal Entry

Can you do with a few tips to ensure your accounts payable journal entry helps you to pay your bills on time and enjoy accurate records?

Tracking accounts payable transactions is a boring but very important part of running a business. You need to keep make an accounts payable journal entry for every bill. Here are some tips to maintain accurate accounts payable records.

Accounts Payable Journal Entry Basics

In order to record accounts payable, you need to understand the fundamental rule of accounting used for GAAP bookkeeping purposes. This simple equation is:

Assets = Liabilities + Equity

All bookkeeping journal entries rely on this equation. You will need to make a debit and a credit in every entry to reflect the value being adjusted. The following table provides an overview of the basics of debits and credits.

                                         Debit             Credit

Asset                              Increase         Decrease

Liability                         Decrease      Increase

Income/Revenue        Decrease       Increase

Expense                        Increase         Decrease

Equity/Capital            Decrease        Increase

To make an accounts payable journal entry, you will add a debit for the asset being purchased and a credit for the accounts payable. For example, let’s assume that you purchased a computer worth $5,000 on credit. You would need to make the following journal entry:

Account                        Debit             Credit

Computer                     5,000

Accounts payable                               5,000

You will eventually need to pay the bill. Here is the journal entry that you will use:

Account                        Debit             Credit

Accounts payable       5,000

Cash                                                        5,000

The process of recording a single entry is very straightforward. The challenge is keeping track of all the purchases that you make on a regular basis. You will need to develop a system to organize your bills and purchases. You also need to check your records regularly to ensure all entries are properly recorded. 

Accounts Payable Journal Entry - Keep Records of All Invoices

It is a good idea to retain copies of all invoices. Even the most cautious business owners can make an error while recording an accounts payable journal entry. You will want to occasionally crosscheck your journal entries against your invoices for accuracy.

You don’t necessarily need to keep the original invoice on hand. You can also take a picture of it and store an electronic copy on your hard drive. However, it is important to keep some record to catch bookkeeping errors.

Record Accounts Payable Every Day

As a business owner, you face a myriad of challenges. You may prioritize other aspects of your company, but recording accounts payable is very important. Companies that don’t record their liabilities and invoices on a daily basis are more likely to fall behind.

Keep records of all bills and record them at the end of the day. You will be less likely to fall behind on bills, overdraw accounts or over report your taxes if you make it a habit.

Use Electronic Bookkeeping Software

There are a number of great accounting programs on the market. Quickbooks, Freshbooks, and Wave Accounting are among the most popular. There are several advantages to using these tools:

  •  You can backup electronic records.
  • You can easily search and organize data, which isn’t a possibility with traditional ledgers.
  • You can update or edit records much more easily after identifying a bookkeeping mistake.

If you haven’t used any of these applications before, then you may want to speak with a professional accountant or bookkeeper. However, you will need to keep thorough records on accounts payable before reaching out to them. If recording accounts payable transactions seems overwhelming you may want to consider using our bookkeeping services. We would love to work with you.

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