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The Process of 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. Another way of understanding accounts payable is 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. The amount standing for accounts payable will be credited and another account must be debited when a vendor’s invoice is recorded. As soon as the amount representing accounts payable is paid, this amount will be debited and Cash will be credited and, thus, the credit balance in accounts payable becomes equal to the amount reflected in the vendor’s invoice which has already 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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Accounts payable are basically a short-term debt, but there are also other short-term business debts, which includes payroll costs, business income taxes and short-term loans. Long-term debts, on the other hand, are the following: lease payments, retirement benefits, individual notes payable and a range of other debts repaid over a long term.
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Trade payable is more long-term than accounts payable, because it refers to all the money a company owes the vendors for the business supplies and materials, which is 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. An enormous amount of detail in the form of documents must be reviewed in the process of accounts payable in order to ensure that only legitimate and accurate amounts are entered in the accounting system, and these referred documents are: purchase orders issued by the company, receiving reports issued by the company, invoices from the company’s vendors, contracts and agreements. The accuracy and completeness of a company’s financial statements are dependent on the accounts payable process, thus a well-run process must include the following: 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. Another benefit of accounts payable automation software is that there won’t be any misplaced invoice anymore and payable is directed instantaneously and accordingly.

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