300 Accounts Payable – Trade Creditors
Liabilities
Accounts Payable
Synopsis
Account 300 is established to record the amounts payable to suppliers and vendors.
Debits |
Credits |
|
|
Example 1
Record the purchase of a stock-order from the manufacturer $16,585 of which $1,265 is a Purchase Allowance.
Journal: Purchase
Entry: |
|
Debit |
Credit |
Account 242 |
Inventory – Parts & Accessories |
$16,585 |
|
Account 300 |
Accounts Payable – Trade Creditors |
|
$15,320 |
Account 687 |
Purchase Allowances |
|
$1,265 |
Example 2
Record the net payment of a vendor’s statement in the amount of $15,475. The cash discount earned is $310, which allows a 2% cash discount, if paid within 10 days.
Journal: Cash Disbursements
Entry: |
|
Debit |
Credit |
Account 300 |
Accounts Payable – Trade Creditors |
$15,475 |
|
Account 202 |
Cash in Bank |
|
$15,165 |
Account 903 |
Cash Discounts Earned |
|
$310 |
Example 3
Record the $17,571 sale of a new vehicle with $523 Due from Finance Companies, $879 Sales tax and $125 Registration Fees. There is a $6,853 lien payoff on the trade with an inventory value of $10,000 on the used car. The inventory value of the new sold vehicle is $16,721.
Journal: New Car Sales
Entry: |
|
Debit |
Credit |
Account 205 |
Contracts in Transit |
$15,428 |
|
Account 240 |
Inventory – Used Cars |
$10,000 |
|
Account 262 |
Due from Finance Companies |
$523 |
|
Account 600-618 |
Cost of Sales – New Cars – Retail |
$16,721 |
|
Account 400-418 |
Sales – New Cars - Retail |
|
$17,571 |
Account 231 |
Inventory – New Cars |
|
$16,721 |
Account 300L |
Accounts Payable – Lien Payoffs |
|
$6,853 |
Account 324A |
Sales Taxes Payable – Excise Taxes |
|
$879 |
Account 806 |
Finance Income – New |
|
$523 |
Account 905 |
Other Income (Registration Fees) |
|
$125 |
Comments
A credit balance represents the net balance due trade creditors.
Amounts owed to vendors through an established open account are credited to this account. Payments tendered to vendors are debited. An accounts payable subsidiary ledger should be established for each vendor. A purchase order system should be utilized so that all purchases are authorized by management and payments are matched to the amount authorized. Each vendor’s account should be reviewed at the end of the month and discrepancies should be resolved immediately.
Debit balances should be shown as Accounts Payable Debit Balances in the Receivables section on page 7, Line 58.
Note:
Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.