Long term liabilities

Long-term notes payable

• This is one of the most common short-term liability.
• Accounts payable appears, when a business buys inventory or other asset on account.
• In accounting equation it will be shown:
• ASSETS = LIABILITIES+OWNER’S EQUITY
• Inventory Accounts payable

10 000 won 10 000 won

Journal Entry will be as below

Inventory 10 000 won

Accounts payable 10 000 won

Accounts payable

Accounts payable

• Accounts payable – is a form of credit that suppliers allow to the clients to pay for product or service later after it has been received.
• Suppliers give an invoice for sold goods or product.
• Payment due time is decided by suppliers and customers.
• Suppliers can give discounts for paying an invoice within a number of day.
• When customers receive invoice, their current liability accounts go up.
• When invoice is paid, accounts payable reduces in the balance sheet from current liabilities.