Quick answer: Accounts payable (A/P) is recorded when you receive goods or services from a vendor and you have an obligation to pay. You generally debit an Expense (or Inventory/Asset) and credit Accounts Payable. When you pay the vendor, you debit Accounts Payable and credit Cash.
Accounts payable — journal entries (quick examples)
Vendor invoice received
| Account | Debit | Credit |
|---|---|---|
| Expense (or Inventory / Asset) | XXX | |
| Accounts Payable | XXX |
Expense accrual (invoice not yet received)
| Account | Debit | Credit |
|---|---|---|
| Expense | XX | |
| Accrued liabilities (or Accrued expenses) | XX |
Vendor payment
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | XXX | |
| Cash / Bank | XXX |
Early payment discount (if taken)
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | XXX | |
| Cash / Bank | XXX-XX | |
| Purchase discounts (or Expense reduction) | XX |
Purchase return / vendor credit memo
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | XX | |
| Expense (or Inventory / Asset) | XX |
Table of Contents
Vendor invoice received
When you receive a vendor invoice, you record the cost based on what you purchased. If it relates to the current period, it’s usually an expense; if it provides future economic benefit, it may be capitalized as an asset; if it’s goods for resale/production, it’s often inventory.
Example: You receive a $2,500 invoice for repairs and maintenance.
| Account | ||
|---|---|---|
| Repairs and maintenance expense | $2,500 | |
| Accounts payable | $2,500 |
Expense accruals (period-end)
If you have received goods/services but haven’t received the vendor invoice by period-end, you may accrue the expense to reflect the obligation in the correct period.
Example: You estimate $1,200 of utilities were consumed in the month, but the bill arrives next month.
| Account | ||
|---|---|---|
| Utilities expense | $1,200 | |
| Accrued expenses (or accrued liabilities) | $1,200 |
When the actual invoice arrives, you typically reverse the accrual (or record the invoice net of the accrual), depending on your close process.
Payments and settlement
When you pay a vendor, you reduce A/P and reduce cash.
Example: You pay the $2,500 invoice.
| Account | ||
|---|---|---|
| Accounts payable | $2,500 | |
| Cash / bank | $2,500 |
Early payment discounts
Some vendors offer discounts for early payment (for example, “2/10 net 30”). If you take the discount, you pay less cash and record the difference as a reduction of expense (or as purchase discounts) depending on your accounting policy.
Example: You owe $10,000 and take a $200 early payment discount, paying $9,800.
| Account | ||
|---|---|---|
| Accounts payable | $10,000 | |
| Cash / bank | $9,800 | |
| Purchase discounts (or expense reduction) | $200 |
Returns and credit memos
If you return goods or receive a pricing adjustment, a vendor credit memo reduces the amount you owe. You debit Accounts Payable and credit the related expense/inventory/asset account.
Example: A vendor issues a $300 credit memo for damaged supplies.
| Account | ||
|---|---|---|
| Accounts payable | $300 | |
| Supplies expense (or inventory) | $300 |
Accounts payable journal entry FAQ
What is the journal entry for an invoice received?
Debit the related expense (or inventory/asset) and credit Accounts Payable for the invoice amount.
What is the journal entry to pay an invoice?
Debit Accounts Payable and credit Cash / Bank for the payment amount.
How do you record accrued expenses vs accounts payable?
Accounts payable is typically used when you have a vendor invoice; accrued expenses are used when you’ve incurred an obligation but the invoice has not yet been received (or the amount is not yet billed).
How do you record an early payment discount?
Debit Accounts Payable for the full amount owed, credit Cash for the amount paid, and credit Purchase Discounts (or reduce the related expense) for the discount taken.
How do you record a vendor credit memo?
Debit Accounts Payable and credit the related expense/inventory/asset account.
Does accounts payable affect the income statement?
A/P itself is a balance sheet liability. The income statement impact comes from the expense or cost you record when you recognize the underlying goods or services.
Internal links (related)
- Journal entries for incorporation costs
- Loan received journal entry (bank loan) + monthly payment example
- Journal entries for owner (shareholder) contributions
- Capitalization of shareholder loans to equity
- Taxation
