Accounts Payable

The term "accounts payable" refers to the unpaid bills of your business, such as money you owe to suppliers for raw materials or stock. These are monies you must pay to others, as opposed to monies payable to you. The total of your accounts payable would be listed in your balance sheet as a current liability.

It will make things easier in the long run if you keep a separate accounts payable ledger for each supplier. Detailed and accurate ledgers will help you control your expenditures. Also, maintaining separate accounts payable ledgers will make it much easier for you to double-check the bills you get from your suppliers.

Account Reconciliation

At the end of each month, your accounts payable ledgers should be reconciled with the accounts payable balance from your general ledger. To the beginning accounts payable total, add purchases on account made during the month. Then subtract payments you have made to the account during the month. This figure should equal the ending accounts payable total, which you can then compare to the sum of the individual accounts payable ledgers.

Most businesses today, even the smallest, prefer to use computer software to keep their financial records. Using software relieves your accountant from having to do manual calculations such as reconciling accounts. In most software, the calculations are done as a running balance, which allows you to keep closer track of where you stand financially and makes errors immediately visible. It also allows your financial officers to spend more of their time on planning and analysis, rather than on time-consuming calculations.