1: account payable definition
2: how accounts payable works
3: account vs notes payable
4: example of account payable
Opening information:
Account payable statement breaks into the two words account and payable, account means reports of the credits and debits of something.
payables means due, which needed to be paid, and account payable means due of one debt report of something.
So this article contains information about what is an account payable, how account payable works in the stock market for corporate industries, and what is the difference between account payable and notes payable, and finally an example of the account payable.
1: account payable definition
Amanda is a wholesaler who has been doing a whole sales business for nearly 6 years now. She has been running his business successfully.
Because she took the product that didn’t have any big profits, she took more customers who demanded the product even though she would had less profits.
This makes Amanda’s business grow very fast and efficiently among the other competitors in his area.
Moreover Amanda’s secret, she didn’t pay the amount to all Company suppliers for the products received to date.
She would make the payment 90 days per once including the WiFi, building rent, and other expenses like electricity items.
However, this makes Amanda less committed to everything by paying the amount every 90 days from suppliers to WiFi.
On the other supplier’s side if Amanda made a payment, within 30 days of delivery, then she had a discount of 3 percent on the total payment amount.
which this offer only exists until the 30th day from the delivery date from all suppliers, when she made payment even after the 30 days one day late on the 31st day, she had made the full payment.
The 90 days is the maximum period she had an agreement with every part of the supplier.
Here all the payments are traced and recorded by Amanda’s employees, when the invoices are created and approved
they are noted as accounts payable in the liabilities of the balance sheet on her business to make a payment in the next 90 days.
The accounts payable are the items, that only track and record the payment for suppliers of the business.
So now let’s dive to know, how this account payable works in the stock market for corporate industries.
2: how accounts payable works
The accounts payable are the ones that are traced and record all the suppliers of invoice payments as accounts payable in the balance sheet.
Most people confuse accounts payable and accounts receivable, so in the balance sheet accounts payable are noted on the liabilities side.
However, the accounts payable are not paid, instead is a tracked amounts of the business that are still not paid but issued the invoice. So don’t determine they are paid amount.
When any of the amounts would be paid as cash, which is preferably noted in a cash flow statement. The cash flow statement is the financial statement that tracks and records the in-flow and outflow cash of the corporations.
Small to big institutions each of them has accounts payable, all the industries neglect any debt or liabilities of the company but they won’t avoid writing accounts payable.
Account payable is the amount are primary things, that all businesses encounter during the activities of manufacturing or reselling the product of the business.
Most people confuse the difference between the account payable and note payable of the business, so let’s jump into the key distinct in it.
3: account vs notes payable
The difference between the account payable and notes payable, the account payable only tracks the supplier payment of invoice.
But notes payable track the bonds, which are issued by the company to the bondholders, to pay the yearly or term interest based on the bond value.
Moreover, the notes payable not only include the bonds, instead any contract agreement, law payment, international law contract payment, deed extra….
So accounts payable and notes payable are not the same thing, which are shown wisely in the liabilities of the balance sheet.
To make this clearer let’s look at one example of accounts payable with different notes payable.
4: example of account payable
Say Company H issued the 3 bonds to the public people, where the bond pays 50,000 dollars yearly.
Company H traced and recorded the supplier invoice for the manufactured product, which is worth 5 million dollars.
Now the supplier invoice became the account payable and and fixed interest of 50,000 dollars for the bond was written as notes payable.
The key to the difference in the account and notes is actually in purpose. Which means how the money of payment is going to be used.
Market rule: #100144
Account payable is the accounting term that must be reported in the balance sheet of the company and is unavoidable at any cost. But making investment decisions completely based on the account payable is quite responsible from your side.
If your investor and not comply or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.