Ministry of Higher and Secondary Special Education of the Republic of Uzbekistan Tashkent State University of Economics

1 – Purchase of the merchandise inventory on account:

When there is a purchase of the merchandise inventory on account, by using the following journal entry, the liability relating to the accounts payable journal entries will be created:

The journal entry passed above for recording the accounts payable liability will be made under the periodic inventory system. However, in the case of the company uses the perpetual inventory system, then the debt part would be replaced by the “inventory account” instead of “purchases account.” The entry, in that case, will be as follows:

2 – Damaged or undesirable inventory returned to the supplier:

Let’s say, in case the part of inventory or whole of the inventory purchased on the account, is found by the buyer to be damaged or undesirable. He may either return the same to the seller; or ask for the allowance as a reduction in prices. Now, if the seller approves the return or the allowance, then the buyer will reduce the accounts payable liability by that amount in his books of accounts. In such cases, the journal entry that will be passed for reducing the liability of the accounts payable is as follows:

Note: The entry for the return of goods or allowance will not be recorded in the general journal as mentioned above in case separate Purchases return, and the buyer maintains allowance journal, and then return, and allowance will be recorded in that purchase return and allowance journal.

3 – Entry when there is the purchase of asset other than the merchandise inventory on account:

In case there is the purchase of assets other than the merchandise inventory on accounts like the plant, furniture, equipment, tools, or other fixed assets. The entry to record accounts payable liability is as follows:

4 – Entry when the expenses incurred on account or the services purchased on account:

When any person acquires any of the professional services like financial consultancy, legal services, etc. or it incurs the expenses for which the payment is to be done on any future date then in that case
If some professional services (such as market and legal services, etc.) are acquired, or expenses are incurred, and the payment for them is to be made in the future, then the accounts payable liability comes into existence. The entry to record accounts payable liability is as follows: