Accounts Payable Journal Entry Examples
Journal entries are the foundation of accounting. Every accounts payable transaction—receiving an invoice, making a payment, applying a credit—needs to be recorded with proper debits and credits. Here’s how to handle the most common AP journal entries.
The Basics
Accounts Payable is a Liability
Accounts payable appears on the balance sheet as a current liability. It represents money you owe to vendors for goods or services you’ve received but haven’t yet paid for.
- Debits decrease accounts payable
- Credits increase accounts payable
The Matching Principle
Expenses should be recorded when incurred, not when paid. When you receive an invoice, you record the expense and the payable. When you pay, you reduce the payable and your cash.
Recording an Invoice
When you receive an invoice, you’re recognizing both an expense and a liability.
Standard Invoice Entry
Scenario: Received invoice for $1,000 of office supplies
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $1,000 | |
| Accounts Payable | $1,000 |
Explanation: The expense increases (debit), and your liability to the vendor increases (credit).
Invoice with Multiple Expense Categories
Scenario: Received invoice for $2,500 covering supplies ($1,000), repairs ($1,200), and shipping ($300)
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $1,000 | |
| Repairs & Maintenance | $1,200 | |
| Shipping Expense | $300 | |
| Accounts Payable | $2,500 |
Invoice for Inventory
Scenario: Received invoice for $5,000 of inventory for resale
| Account | Debit | Credit |
|---|---|---|
| Inventory | $5,000 | |
| Accounts Payable | $5,000 |
Note: Inventory is an asset, not an expense. The expense (Cost of Goods Sold) is recorded when you sell the inventory.
Invoice for Fixed Assets
Scenario: Received invoice for $10,000 equipment purchase
| Account | Debit | Credit |
|---|---|---|
| Equipment (Fixed Asset) | $10,000 | |
| Accounts Payable | $10,000 |
Note: Fixed assets are depreciated over time, creating expense entries in future periods.
Making Payments
When you pay an invoice, you’re reducing both your liability and your cash.
Basic Payment Entry
Scenario: Paying $1,000 invoice by check
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Cash | $1,000 |
Payment with Early Payment Discount
Scenario: $1,000 invoice with 2% discount for early payment (2/10 Net 30). You pay within 10 days.
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Cash | $980 | |
| Purchase Discounts | $20 |
Alternative treatment (recording discount as income):
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Cash | $980 | |
| Discount Income | $20 |
Partial Payment
Scenario: Making $500 payment toward $1,000 invoice
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $500 | |
| Cash | $500 |
The remaining $500 stays in accounts payable until paid.
Payment by Wire or ACH
The entry is the same as a check—only the payment method differs (which may affect which cash account you use if you track separately).
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Operating Cash Account | $1,000 |
Credit Memos and Adjustments
Receiving a Credit Memo
Scenario: Vendor issues $200 credit for returned merchandise
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $200 | |
| Returns & Allowances (or original expense account) | $200 |
This reduces what you owe (debit to AP) and reduces your expense (credit).
Applying Credit to Invoice
Scenario: Paying $1,000 invoice but applying $200 credit
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Cash | $800 | |
| Accounts Payable (credit application) | $200 |
Simplified (if credit already recorded):
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $800 | |
| Cash | $800 |
Writing Off Small Balance
Scenario: $3.27 remaining balance not worth pursuing
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $3.27 | |
| Miscellaneous Expense (or income if credit balance) | $3.27 |
Accruals
Accruing for Invoice Not Yet Received
Scenario: Month-end, you received $5,000 of services but invoice hasn’t arrived
| Account | Debit | Credit |
|---|---|---|
| Professional Services Expense | $5,000 | |
| Accrued Expenses | $5,000 |
Note: This goes to Accrued Expenses (liability), not Accounts Payable, until the actual invoice arrives.
Reversing Accrual When Invoice Arrives
Scenario: Following month, the actual invoice for $5,200 arrives
First, reverse the accrual:
| Account | Debit | Credit |
|---|---|---|
| Accrued Expenses | $5,000 | |
| Professional Services Expense | $5,000 |
Then record the actual invoice:
| Account | Debit | Credit |
|---|---|---|
| Professional Services Expense | $5,200 | |
| Accounts Payable | $5,200 |
Net effect: $200 additional expense recognized in the current period.
Special Situations
Prepaid Expenses
Scenario: Paying $12,000 for one year of insurance in advance
When paid:
| Account | Debit | Credit |
|---|---|---|
| Prepaid Insurance | $12,000 | |
| Cash | $12,000 |
Monthly amortization:
| Account | Debit | Credit |
|---|---|---|
| Insurance Expense | $1,000 | |
| Prepaid Insurance | $1,000 |
Sales Tax on Purchases
Scenario: $1,000 purchase plus $80 sales tax
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $1,000 | |
| Sales Tax Expense (or Input Tax Credit if recoverable) | $80 | |
| Accounts Payable | $1,080 |
Foreign Currency Invoice
Scenario: Invoice for €1,000 when exchange rate is 1.10 USD/EUR
At invoice receipt:
| Account | Debit | Credit |
|---|---|---|
| Expense | $1,100 | |
| Accounts Payable | $1,100 |
At payment (rate now 1.12):
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,100 | |
| Foreign Exchange Loss | $20 | |
| Cash | $1,120 |
Correcting Errors
Invoice Posted to Wrong Account
Scenario: $500 office supplies invoice was posted to equipment expense
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $500 | |
| Equipment Expense | $500 |
Duplicate Invoice Entry
Scenario: Same $1,000 invoice was entered twice
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $1,000 | |
| Office Supplies Expense | $1,000 |
Key Takeaways
- Invoices create a liability (credit AP) and an expense (debit expense account)
- Payments reduce liability (debit AP) and cash (credit cash)
- Credits reduce liability (debit AP) and expense (credit expense)
- Match expenses to the period they’re incurred, not when paid
- Use accruals when you know you owe but haven’t received the invoice
Need better tracking of invoices before they hit your accounting system? See how BillerPlus creates an intake audit trail →