CHAPTER TWENTY
THE ACCOUNTS
PAYABLE LEDGER
20-3
THE ACCOUNTS PAYABLE LEDGER
Objectives:
1. Post to the Accounts Payable ledger.
2. Prepare a schedule of Accounts Payable.
3. Record transactions involving notes payable.
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20-4
The Accounts Payable Ledger
Businesses use special ledgers like
the Accounts Payable ledger to be
more efficient in their financial
operation.
Separate accounts are used for each
creditor.
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20-5
The Accounts Payable Ledger
(continued)
All accounts for creditors can be
placed in the Accounts Payable
ledger.
Accounts Payable ledgers are known
as subsidiary ledgers.
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20-6
Posting To the Accounts Payable
Ledger
Entries should be posted to the
Accounts Payable ledger on a daily
basis.
Up-to-date information is critical for
the operation of a business.
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20-7
Posting to the Accounts Payable
Ledger (continued)
When the ledger is set up, the name,
address, and terms for each creditor
are recorded on a separate ledger
card.
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20-8
Posting to the Accounts Payable
Ledger (continued)
Each transaction listed in the
purchases journal is posted
individually to a creditor’s account
in the Accounts Payable ledger.
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20-9
Posting to the Accounts Payable
Ledger (continued)
If a creditor’s account already has a
balance when a purchase is posted,
the amount of the purchase must be
added to the previous balance.
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20-10
Posting to the Accounts Payable
Ledger (continued)
Each transaction listed in the
Accounts Payable Debit column of
the cash payments journal is posted
individually to a creditor’s account in
the Accounts Payable ledger.
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20-11
Posting to the Accounts Payable
Ledger (continued)
Each time Accounts Payable is
debited or credited in the General
Journal, the entry is posted
individually to a creditor’s account in
the Accounts Payable Ledger.
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20-12
Proving the Accounts Payable
Ledger
At the end of the month, the
Accounts Payable ledger must be
proved. To do this, a schedule of
Accounts Payable is prepared.
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20-13
Proving the Accounts Payable
Ledger (continued)
The name and account balance for
each creditor with an unpaid balance
are listed on the schedule form.
The balances are added to find the
total amount owed to all creditors.
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20-14
Proving the Accounts Payable
Ledger (continued)
The total of the Schedule of
Accounts Payable is compared with
the balance of the Accounts Payable
account in the General Ledger. The
two accounts must be the same.
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20-15
Proving the Accounts Payable
Ledger (continued)
Even though the totals agree, there
may still be an error, such as posting
the correct amount to the wrong
creditor’s account.
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20-16
Proving the Accounts Payable
Ledger (continued)
The Accounts Payable account in the
General Ledger is known as the
control account because it
summarizes the balances of the
subsidiary ledger.
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20-17
Notes Payable
Sometimes businesses may need an
extension to pay the balance owed.
Once a firm date for payment has been
established, a promissory note is
issued, indicating the pertinent
information.
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20-18
Notes Payable (Continued)
To account for the change Accounts
Payable is debited and Notes Payable
is credited.
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20-19
Accounting Terminology
•Accounts Payable ledger
•Interest expense
•Notes payable
•Schedule of accounts payable
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20-20
Chapter Summary
• The Accounts Payable ledger is a
subsidiary ledger that contains
individual accounts for all creditors.
• Transactions involving creditors are
posted to the Accounts Payable
ledger from the Purchases Journal,
the Cash Payments Journal, and the
General Journal.
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20-21
Chapter Summary (continued)
• At the end of each month, the
Accounts Payable ledger is proved.
• The Accounts Payable account in
the General Ledger account is a
control account.
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20-22
Chapter Summary (continued)
• Promissory notes given by a
business are a liability and are
known as notes payable.
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20-23
Investigating on the Internet
As a research assignment, access the
oracle web site and report the sources of
information that might concern Accounts
Payable.
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20-24
Topic Quiz
Answer the following true/false questions:
1. The Accounts Payable control account
does not provide a total for the amount
owed by credit creditors.
FALSE
2. There is no need to prove the Accounts
Payable ledger monthly.
FALSE
3. Information found in the schedule of
Accounts Payable by age is needed for
paperwork sent to the IRS.
FALSE
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20-25
1. The Accounts Payable control account
does not provide a total for the amount
owed by credit creditors.
FALSE
It DOES provide a total of the amount owed
by credit creditors.
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20-26
2. There is no need to prove the Accounts
Payable ledger monthly.
FALSE
The Accounts Payable ledger must be
proven monthly.
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20-27
3. Information found in the schedule of
Accounts Payable by age is needed for
paperwork sent to the IRS.
FALSE
It is not needed by the IRS. It is needed by the
management to make financial decisions.
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