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Understanding Accounts Payable Accounts payable is an accounting entry that stands for an entity’s obligation to pay off a short-term debt to its creditors, and since it is an entry, on the balance sheet accounts payable appears under the heading current liabilities. Further, to have a better understanding of accounts payable, it can also be described as when a company orders and receives goods (or services) in advance of paying for them, that company is purchasing goods “on account” or “on credit.,” and the vendor’s bill or invoice will be recorded by the company in its liability account titled Accounts Payable. As soon as the vendor’s invoice is recorded, the amount representing accounts payable will be entered as credit and for it to be balanced, another account must be debited. When the amount of accounts payable is paid, that amount will be entered into the debit column and Cash will be credited; therefore, the credit balance in accounts payable is equal to the amount of the vendor’s invoice that have been recorded but have not been actually paid yet. The process of accounts payable may also point to an accountant in the business department or account personnel who process the vendor invoices for payment of the company’s bills.
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There are other short-term debts that may be referred to, aside from accounts payable, and they are: payroll costs, business income taxes and short-term loans. On the other hand, long-term debts include lease payments, retirement benefits, individual notes payable and a range of other debts repaid over a long term.
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There is a slightly differentiation between the terms accounts payable to trade payable, such that trade payable constitute all the money a company owes the vendors when it buys business supplies and materials are included in the company’s inventory. The difference between accounts receivables to accounts payable is that in accounts receivables it refers to the money that is owed to a company. The following documents are a summary of details which must be reviewed thoroughly to ensure that only legitimate and accurate amounts are entered in the accounting system: purchase orders issued by the company, receiving reports issued by the company, invoices from the company’s vendors, contracts and agreements. Through an accurate and detailed accounts payable process, the company’s financial statements are described as also accurate and complete, and this can be achieved if the process is well-run, following these procedures: the timely processing of accurate and legitimate vendor invoices, accurate recording in the appropriate general ledger accounts, and the accrual of obligations and expenses that have not yet been completely processed. Currently, business process automation, which is accounts payable automation software, has been introduced to manage accounts payable, which has helped a lot in maintaining accurate reporting, as well as reduced the time needed to process an invoice. Furthermore, with accounts payable automation software, there won’t be any misplaced invoice anymore and payable is directed instantaneously and accordingly.

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