Glossary
What is accounts payable?
Every supplier bill you have not yet paid sits in one account. Here is what it is, how it moves and how to read it.
Updated
In short
Accounts payable is the money a business owes suppliers for goods or services bought on credit. In SimpleERP, posting a supplier bill opens the payable and each payment allocated to it reduces it.
Accounts payable is the money a business owes its suppliers for goods and services it has received on credit. Each posted supplier bill adds to it and each payment reduces it. It is a current liability on the balance sheet, often called sundry creditors in Indian books, and a payables ageing report shows how long each amount has been outstanding so you can plan payments and keep supplier terms.
Accounts payable: a worked example
Lakshmi Steel Furnitures buys steel sheets from Tamil Nadu Steels for ₹1,20,000 plus 18% GST on 30 days' credit. The bill posts this journal:
| Account | Debit | Credit |
|---|---|---|
| Inventory (steel sheets) | ₹1,20,000 | |
| Input CGST 9% | ₹10,800 | |
| Input SGST 9% | ₹10,800 | |
| Accounts payable: Tamil Nadu Steels | ₹1,41,600 |
Two weeks later Lakshmi Steel pays ₹80,000 from the bank and allocates it to the bill. The payable to Tamil Nadu Steels falls to ₹61,600, and the bill shows as partially paid.
Is accounts payable an expense?
No. It is a liability. The expense or the stock is recorded when the bill posts; the payable only records that the cash has not left yet. Paying the bill moves money from the bank to clear the liability and does not touch profit.
FAQ
Questions, answered
What is the difference between accounts payable and accounts receivable?
Accounts payable is what you owe suppliers, a liability. Accounts receivable is what customers owe you, an asset. Both come from credit transactions, one from purchase bills and one from sales invoices, and both are tracked party by party with an ageing report showing how overdue each amount is.
Is accounts payable the same as sundry creditors?
In most Indian small business books, yes. Sundry creditors is the traditional name for the group of supplier accounts with credit balances. Accounts payable is the same balance under its modern name. Both show the total owed to suppliers for goods and services already received.
Can I pay a supplier before the bill is posted?
Yes. Record the payment as an advance to the supplier. It sits on their account until the bill arrives, and then you allocate the advance against it. The supplier's balance stays correct throughout, because it is worked out from bills and payments rather than typed in.
How do I know which supplier bills to pay first?
Run a payables ageing report. It groups unpaid bills by how far past due they are, supplier by supplier. Pay the oldest and the ones with the strictest terms first, and watch MSME suppliers, whose dues generally must be paid within 45 days.
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