Accounts payable journal entry explained: Definition, types and examples

A natural part of growing your business is accumulating suppliers and making purchases on credit to drive your operations.

You’ll keep track of those purchases in your accounts payable ledger, with journal entries for every transaction that creates a liability.

This guide explains when and how to record these entries, giving you practical examples of how they work and what they look like.

Proper journal entry recording is key to maintaining precise records, so you can plan ahead without missing a single payment.

Here’s what we cover:

What is an accounts payable journal entry?

An accounts payable (AP) journal entry is a formal record of a financial transaction representing a pending obligation to one of your business’s suppliers.

These entries follow the principle of double-entry bookkeeping, where every transaction affects at least two accounts.

Like all ledger entries, AP credit transactions require a corresponding debit entry to maintain balance—typically recorded in an expense or asset account when an invoice is received, or in the accounts payable ledger when a payment is made.

An accounts payable (AP) journal entry specifically records changes in your company’s operational liabilities—the money owed to vendors for goods or services received on credit. It documents increases when new invoices are recorded and decreases when payments are made.

These entries are essential for maintaining accurate financial records, tracking your spending, and ensuring that your financial statements reflect the true state of your business’s obligations.

When do you need an accounts payable journal entry?

You’ll need an AP journal entry whenever your business incurs a liability to a supplier. This typically happens when you:

• Receive an invoice for goods or services purchased on credit
• Return damaged or incorrect goods to a supplier
• Make a payment towards an outstanding invoice
• Receive a credit memo from a supplier
• Adjust an existing invoice to reflect discounts
• Incur fees and interest charges for late payment of invoices.

Essentially, any event that alters the amount your business owes to its suppliers requires an AP journal entry.

Even correcting an error requires a new journal entry.

Accounts payable and receivable journal entries

Just as the accounts payable (AP) ledger documents amounts you owe, you also keep a ledger for amounts owed to you—usually by customers. This is the accounts receivable (AR) ledger.

The accounts payable and accounts receivable ledgers both track financial transactions, but they represent opposite sides of the business relationship.

The principles for recording AR journal entries are similar to those for AP entries, except that the debit/credit application is reversed:

Accounts payable (AP)

• Records the money your business owes to suppliers.
• Represents a liability.
• Increases with credits and decreases with debits.

Accounts receivable (AR)

• Records the money customers owe to your business.
• Represents an asset.
• Increases with debits and decreases with credits.

AP journal entry vs accrued payable and notes payable journal entry

Accounts payable entries typically arise from short-term purchases on credit, documented by invoices.

However, in business, there are often circumstances in which you have other pending payments subject to slightly different terms.

For example, you may wish to plan ahead by recording expenses incurred but not yet invoiced, such as utilities or employee wages. These are called accrued payables.

Or your supplier may accept a formal promise to pay under specific terms, known as promissory notes. Some businesses prefer this option when dealing with larger transactions or when a more formal payment agreement is required, often including interest charges and defined repayment schedules. You record promissory notes in another ledger, called notes payable.

These transaction types, along with accounts payable (AP), represent liabilities and obey the same double-entry accounting principles.

The difference is that:

• Accounts payable entries are used for standard supplier transactions
• Accrued payable entries are for estimated expenses
• Notes payable entries are for formal debt agreements.

While AP credit transactions can be balanced by a debit entry in an expense ledger, asset account, or within the AP ledger itself (when making a payment), it’s slightly different for the other two liability accounts.

Balancing accrued payable and notes payable accounts has specific requirements:

• Accrued payables: typically balanced by a debit entry to the related expense account.
• Notes payable: balanced by a debit entry to either the cash account (when the loan is received) or, during repayment, by debit entries to both the cash account and an interest expense account.

What if an accounts payable journal entry is incorrectly recorded?

If you discover an incorrect AP journal entry, it must be corrected immediately.

However, it’s not a simple matter of deleting the wrong entry and typing in the correct figure, as this would break the audit trail.

Instead, a correcting journal entry must be made.

If the original entry overstated liabilities, you’ll add a correcting debit to the AP and a corresponding credit to the affected account.

If the original entry understated liabilities, you credit the AP and add a corresponding debit to the affected account.

Clear documentation of the correction is essential. For example, the correcting entry should reference the original incorrect entry and explain the reason for the adjustment, maintaining a transparent and auditable record.

It goes without saying that incorrect entries in any ledger account have a knock-on effect all the way down to your financial statements.

This would affect your key metrics and your business’s ability to make informed decisions about resource allocation, investment, and operational efficiency.

Key elements of a journal entry for accounts payable

For accuracy, completeness and smoother audits, every AP journal entry should include:

• The date of the transaction
• The accounts affected—typically accounts payable and an expense or asset account
• The debit and credit amounts—which must be equal, to maintain balance
• A clear description of the transaction—such as items purchased or services rendered
• The supplier’s name or invoice number—for easy reference and to support audit trails.

Accounts payable journal entry types and how to record them

Every credit transaction affects the AP ledger and some other relevant ledger.

Let’s look at some specific cases and how the journal entry records them:

AP journal entry for the purchase of inventory

Accounts affected	Movement
Inventory	Debit
AP	Credit

AP journal entry for damaged or undesirable inventory returned to the supplier

Accounts affected	Movement
Inventory	Credit
AP	Debit

AP journal entry for assets purchase

Accounts affected	Movement
Assets	Debit
AP	Credit

AP journal entry for services received (such as consulting fees)

Accounts affected	Movement
Expenses	Debit
AP	Credit

AP journal entry when a payment is made to a creditor

Accounts affected	Movement
Cash or bank account	Credit
AP	Debit

Accounts payable journal entry examples

The above examples deal with the overall circumstances of typical AP journal entries. But what do they look like in practice?

Here are some detailed examples:

Making a purchase

Suppose you purchase $2,000 of office supplies on credit. You’ll debit office supplies $2,000, and credit accounts payable with the pending payment, also $2,000.

In this case, we select office supplies instead of the general expense account because it’s beneficial to manage as many detailed ledgers as practical.

This helps you track spending accurately and make better operational decisions.

Date	Description	Supplier details	Accounts affected	Credit	Debit
03/07/2025	Paper and toner Invoice #: 03494	General Supplies, inc.	Accounts payable	$2,000
			Office supplies		$2,000

Paying off the purchase

Eventually you pay the invoice—in this case one month later.

This time, the accounts affected are accounts payable (now debited $2,000) and cash (credited $2,000 because that debt is no longer pending).

Date	Description	Supplier details	Accounts affected	Credit	Debit
04/07/2025	Paper and toner Invoice #: 03494	General Supplies, inc.	Accounts payable		$2,000
			Cash	$2,000

Purchase abandoned

If some of the office supplies were damaged or unnecessary, you might return them.

In this case, let’s imagine the error is discovered two days after invoicing—March 9, while the invoice date above was March 7.

You want to return an amount equivalent to $500.

Here, you go back to the office supplies account, because you are reversing the initial purchase transaction.

You debit accounts payable $500 and credit office supplies $500, reducing both your liability and the recorded cost of office supplies.

Note that you can’t use the same invoice number from the original $2,000 transaction. This is a new transaction.

Adjustments of this kind are recorded in a new document called a credit memo.

Date	Description	Supplier details	Accounts affected	Credit	Debit
03/09/2025	Paper and toner. Credit memo #1	General Supplies, inc.	Accounts payable		$500
			Office supplies	$500

Common AP journal entry errors and best practices

Even with digital systems there is always a human element, such as data entry. This means there is the possibility for errors and anomalies to occur.

Here are some common errors to look out for:

• Incorrect account selection: for example, a purchase of equipment might be incorrectly recorded as an office supply expense. This often happens due to a lack of understanding of the chart of accounts or carelessness during data entry.
• Wrong debit or credit amounts: sometimes we simply hit the wrong key, creating a typo, or we miscalculate. And in the rush to get things done, it’s easy to misread the figure on the invoice. Either way, incorrect figures will eventually lead to an imbalance in the accounting equation.
• Other data entry errors: common offenders include wrong invoice numbers or dates. Duplicate entries can also happen when the same invoice is recorded multiple times, leading to inflated liabilities.
• Missing documentation: this refers to the absence of supporting documents such as invoices, purchase orders, or credit memos. Often, it’s a matter of forgetting to attach the document in an email, or link to it in your accounting system. Without these, it’s difficult to verify the accuracy of journal entries and maintain an audit trail.
• Late entry of transactions: failing to record transactions promptly can lead to inaccurate financial statements and cash flow issues. Delays can cause missed payments, late fees, and strained supplier relationships.
• Overlooking unexpected operational events: you may have to adjust figures to account for returns (such as when goods are sent back to the supplier), discounts (for early payment or bulk purchases, for example), or credit memos sent in such cases. Failure to account for such changes can result in overstated liabilities and incorrect financial reporting.

To avoid these errors, ensure proper training for accounting staff, implement a review process, and maintain clear documentation. Always double-check entries before posting them.

Do this by:

• Cross-referencing amounts: compare the journal entry amounts to the supporting documents
• Reviewing the description: make sure the description is clear and accurate.

Avoid relying solely on manual data entry, which is prone to errors. But even with an automated system, you should implement protocols for checks and balances.

For example, have a second person review all journal entries before they’re posted to the general ledger.

Or implement a segregation of duties, so that the person who enters the data isn’t the same person who approves the payments.

Managing accounts payable journal entries with AP automation software

Accounts payable software automatically generates journal entries from invoices, reading and extracting relevant data such as invoice numbers, monetary amounts and supplier information.

It can also manage approval workflows and thresholds, as well as payment scheduling. This is possible because you can predefine rules and approval hierarchies, ensuring that invoices are routed to the appropriate personnel for review and authorization.

Integration with your other financial systems gives you a centralized overview of all your AP processes and transactions. This means you can instantly review bills, approvals, payment status, posting details, and audit trails—anything that you register electronically.

These features help you save time in basic operations by minimizing manual work, but also through a reduction of errors, such as duplicate invoices. Also, the improved real-time visibility into your AP ledger helps detect and prevent fraud.

All in all, these systems make your financial management process more streamlined and efficient.