ACCOUNTING · FREE FOUNDATIONS COURSE

Accounts Payable Essentials

Learn how supplier invoices move from receipt to approval, recording, payment and reconciliation. All transactions and vendors used here are fictional.

6 lessonsPractice LabFinal assessmentCompletion certificate

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01 · The payable cycleOpen lesson

A bookkeeper reviews a supplier invoice beside delivered office supplies. — The payable cycle · Original lesson illustration

Accounts payable records amounts a business owes suppliers for goods or services already obtained on credit. A payable is a liability, not proof that cash has already been paid. The workflow commonly includes receiving an invoice, verifying it, obtaining approval, recording it and arranging payment. Keep a document trail so another person can follow each step.

Worked example

A supplier bills $480 for delivered office supplies. Under accrual accounting, debit supplies or the appropriate expense account and credit accounts payable for $480. The exact debit depends on the item and the business policy.

Try it yourself

Draw the steps from receiving an invoice to settling it. Identify where approval occurs.

An unpaid supplier invoice for delivered goods normally creates which account type?RevenueLiabilityOwner distributionCash receipt

02 · Invoice intake and duplicate checksOpen lessonLocked — complete previous lessons

A bookkeeper compares two invoices for possible duplication. — Invoice intake and duplicate checks · Original lesson illustration

An invoice register captures supplier identity, invoice number, invoice date, amount, due date and status. Verify the supplier and read line items rather than relying only on the total. A duplicate check should consider supplier, invoice number, amount and date; small format differences can disguise the same bill. Do not erase an audit trail to resolve an exception.

Worked example

Invoice AB-104 for $350 appears twice, once as AB104. Compare the underlying supplier documents before creating another payment.

Try it yourself

Create a fictional register row and list three fields used to spot a duplicate.

What is the best response to a possible duplicate?Pay both to avoid delayVerify the original record and hold the exceptionDelete all invoicesChange the amount randomly

03 · Three-way matchingOpen lessonLocked — complete previous lessons

A bookkeeper compares purchase, delivery and invoice documents beside office supplies. — Three-way matching · Original lesson illustration

A three-way match compares the purchase order, evidence of receipt and supplier invoice. Check quantities, unit prices and agreed terms. This control helps reveal goods billed but not received or prices that differ from the order. Service purchases may use other documented evidence of completion under the organization’s policy.

Worked example

An order allows 20 units at $15, but only 18 arrive. An invoice for $300 bills all 20. Flag the quantity difference rather than assuming the missing items arrived.

Try it yourself

Use the Invoice Match Lab to compare ordered, received and billed quantities.

Only 18 of 20 ordered units arrived; the supplier billed 20. What should happen?Approve without checkingInvent a receiving recordFlag the mismatch for authorized reviewAutomatically reject every future invoice

04 · Terms, discounts and schedulingOpen lessonLocked — complete previous lessons

A bookkeeper schedules supplier payments using an invoice folder and desk calendar. — Terms, discounts and scheduling · Original lesson illustration

Payment terms explain when a bill is due and may offer an early-payment discount. Confirm how the invoice or agreement defines the dates. A discount can reduce cost, but payment still needs valid approval and enough cash. Keep disputed invoices distinguishable from approved invoices that are simply scheduled for later.

Worked example

For this exercise, 2/10, net 30 means a 2% discount if paid within 10 days, otherwise the full amount within 30 days. A $1,000 eligible invoice has a $20 discount and a $980 payment.

Try it yourself

Calculate a 2% discount on $750: $15. Discounted payment: $735.

What is 2% of a $500 invoice?$2$5$10$50

05 · Approvals and payment controlsOpen lessonLocked — complete previous lessons

Two coworkers review invoice documents and verify supplier details by telephone. — Approvals and payment controls · Original lesson illustration

Separate incompatible duties where practical: creating suppliers, approving invoices and releasing payments should not all depend on one unchecked action. When staffing is small, an independent review can provide another control. Verify bank-detail changes through a trusted contact method already held on file; do not rely only on the contact information inside the change request.

Worked example

An email requests payment to a new account. The reviewer calls the supplier through a previously verified number and documents the verification before changing records.

Try it yourself

Write a short approval checklist with identity, supporting documents and payment authorization.

How should a supplier bank-change request be verified?Using only the number in the requestThrough an independently trusted contact methodBy asking an unrelated supplierBy paying immediately

06 · Reconciliation and period-end reviewOpen lessonLocked — complete previous lessons

A bookkeeper compares a supplier ledger, statement and payment receipts. — Reconciliation and period-end review · Original lesson illustration

Payment reduces the payable and cash; it does not create the same expense a second time. Reconcile the payable ledger to supplier statements and the control account, investigating timing differences, credits and missing invoices. Period-end work may include recording received goods or services not yet invoiced, following accounting policy and authorized review.

Worked example

Paying the $480 liability: debit accounts payable $480 and credit cash $480. The liability and cash decrease together.

Try it yourself

Finish your invoice-register project and explain how a supplier credit would be tracked.

When an already-recorded payable is paid, what generally happens?Expense is recorded twiceAccounts payable and cash decreaseRevenue increasesAccounts payable increases

Accounts Payable Essentials

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