Elements Of The Accounting System: Accounts Payable

Whom do you owe? Keep track with the accounts payable ledger.

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The accounts payable subledger is similar to that used to track accounts receivable. The difference is that accounts payable occur when you purchase inventory or other assets on credit from a supplier.

It is important to track accounts payable in a timely manner to ensure that you know how much you owe each supplier and when payment is due. Many a good supplier relationship has been damaged due to a sloppy accounts payable system. Also, if your suppliers offer discounts for payment within 10 days of invoice, a good automated accounts payable system will alert you when to pay to maximize the discounts earned.

Excerpted from Start Your Own Business: The Only Start-Up Book You'll Ever Need, by Rieva Lesonsky and the Staff of Entrepreneur Magazine, © 1998 Entrepreneur Press

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