Accounts Payable
Paying The Bills

Accounts Payable is the accounting term for all those pesky bills that you have to pay. It is a liability account in your Chart of Accounts. Another term commonly used is Vendor Payables or Trade Payables.

Incurring bills is a part of every small business bookkeeping system, and the bills are as varied as the businesses we all run.

However, not all of these bills are considered Accounts Payable.

Remember your Chart of Accounts? Your liabilities consist of -

**your Accounts Payable

**any credit card balances you are paying on

**any loans you have, be they mortgages or auto loans

**any lines of credit

These loans, or Payables, which is the accounting term for loan, will have their own account in your Chart of Accounts. For example, CapitalOne Payable, Mortgage Payable, Vehicle Loan Payable, or Fuzzy Bank Line of Credit Payable.

For more on small business loans, and how to account for them, click here.

a. utilities - electric or gas payments

b. phone bills

c. internet service bills

d. payments due your accountant or attorney

e. repair bills

f. office supplies purchased on credit

g. payments due any subcontractors

h. rent payments

i. credit card payments if you pay the balance in full each month

j. advertising bills

k. equipment lease payments

l. any maintenance agreement payments

m. insurance payments

n. freight bills

o. subscriptions or dues

p. purchases of products or materials used in your business

Accounts Payable (A/P) is the account to place (accounting term is POST) any bill you're not going to pay right now. Anything purchased on credit or paid on a regular basis is a candidate for your A/P system.

If a subcontractor hands you a bill and you cut him or her a check right there, don't bother with A/P, just post the check to the appropriate expense account.

JUST WHAT IS POSTING?

Just briefly, let me explain the "posting" process. Whether you use a manual system or a computer system, when you write a check or enter a bill in your basic accounting software you will be coding it.

This code is an account in your Chart of Accounts, like Office Supplies or Subcontractors or Repairs & Maintenance.

Remember the Accounting Cycle? Activity leads to transactions which lead to entries in journals which lead to financial statements.

Posting is the "entries in journals" process. That code that I mentioned is the account in your Chart of Accounts that you post to, and it determines which financial statement the transaction shows up on.

Just real quick (more details on this later) your

Balance Sheet shows your assets, liabilities, and equity (ownership), and your

Income Statement shows your revenue and expenses.

Back to paying your bills...

You can keep a Manual small business bookkeeping system, and file your bills in a paper folder and do this coding as you write checks. Or you can use a Voucher System, and record your bills in your computer's basic accounting software system and then pay them later thru your pay bills feature.

I have more information on both these options on the pages listed below. Be sure to check them out!

Also, if you have any questions, be sure to Ask The Expert! Click here!



Learn more about using a Manual small business bookkeeping system.


Learn more about using a Voucher System.