300 Accounts Payable – Trade Creditors

Liabilities

Accounts Payable

Synopsis

Account 300 is established to record the amounts payable to suppliers and vendors.

Debits

Credits

  1. The amount of cash discounts taken

  2. Payments made on open account

  3. Payments made on used and repossessed vehicles acquired

  4. Purchases returned to suppliers

  5. The amount of credit memos received from vendors or suppliers

  6. Payments transmitted to others for customers

 

  1. Purchases on open account

  2. Liens due on used vehicles

  3. Balances due on repossessed vehicles

  4. Payments collected from customers for transmittal to others

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.