What is expense Payable?
No! Expense Payables are not expenses! There! i said it and let this sink into your head. They are current liabilities. Allow me to explain.
Expenses Payable are Current Liabilities
Expense Payable is a liability that you owe and had not yet pay. Think of the mobile phone bill of $100 from last month. If you had paid $60 dollars. You are still owing $40 dollars. That $40 is your expense payable. Are you going to owe it more than a year? You wish. But, no. The mobile company will most probably terminate your line if you owe them for months. So, most probably, you will have to settle the bill within a year. This makes it a current liability.
What does expense payable means at the start of the year?
If there is expense payable at the start of the year, it means that the business had owe expenses from last year. Since it is expenses incurred last year, these are not ‘expenses’ these years. Hence, it should be ‘deducted’ from this year’s expenses accounts. The double entry will be
-DR Expenses
-CR expense payable
What does expense payable means at the end of the year?
If there is expense payable at the end of the year, it means that the business had owe expense for this year. Since it is expense incurred this year, these had to be included into this year’s expenses. The double entry will be
-DR Expense Payable
-CR Expenses
How does expense payable appears in Statement of financial position?
Expense payable are current liabilities. Thus, it should be reflected in the current liabilities section of the statement of financial position.
If you want to know the techniques to learn for learning Principles of Accounts (POA), read up Learning Principles of Accounts (POA) and Scoring As.
Felix Lim is the coach for Principles of Accounts (POA) Tuition class in Edulight Learning Hub. Experience in the line of coach Principles of Accounts (POA) for over 10 years, he understood well how students learn through the wrong methods. He seeks to correct the wrong methods of learning in Principles of Accounts (POA) and advocate “Understanding not Memorizing” in his teachings.
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