Accounts Payable

Any time you hear of a PAYABLE, no matter what is being referred to, you should know that we are referring to a debt/liability. For example if we are talking of Z payable, X payable Y payable, then it implies that there is a debt of Z,X, and Y nature to be paid in the future respectively.

Accounts Payable is the amount of unpaid debt originating from goods bought on credit for re-selling purposes by the business in question. It applies when the business acquires goods for re-selling purposes from the supplier on credit basis. It is also referred to as trade creditors.

Accounts Payable arise when the business in question is not in a position to purchase inventory on cash basis hence borrow from the supplier through credit purchasing. It is a way of financing a business for a short period. Sometimes the instrument use is referred to as trade creditors.


23rd/12/2020, Motololar co ltd purchased goods for reselling purpose worth $160,000 from Lolar Moto co ltd on credit. Terms of repayment is in two months.


  1. Show the journal entry for the aforementioned transaction
  2. Show the ledger account entry thereof
  3.  Extract a statement of financial position to show how this transaction was treated



About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.