The concept and main types of accounts payable

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the process of economic activity, the role of a performer or customer can be played by any association. Accounts receivable and accounts payable are formed on his accounts during settlements. The article deals with the concept and types of accounts payable, as well as aspects of each of the categories.

Features of receivables

Today, the definition of accounts receivable means the total debt of associations, citizens and employees of a particular structure. Simply put, these are the debts of buyers for the purchased product, services or work, the debt of accountable persons for the funds issued to them. Debtors are individuals and enterprises that owe a certain amount of money to a particular organization.

Classification of receivables

It is worth noting that there are quite a lot of concepts and types of receivables and payables. There are several types of categories according tocommitment content:

• Debts related to the sale of goods, services, work or products.
• Debts not related to the sale of goods, services, products or work.

Based on duration, receivables are divided into short-term and long-term. According to the factor of timeliness of payment, the following categories of debt are distinguished: normal and overdue (doubtful and hopeless).

The concept and types of accounts payable

Under accounts payable, as one of the categories of legal significance, understand the relationship of an obligation nature between an enterprise and its creditors. The economic aspect is represented by the organization's cash (most often) and inventory items. Despite the fact that the structure uses all currently known types of accounts payable, it is obliged to return or pay creditors the due part of the property complex. Creditors, in turn, have the full right to demand performance of the obligation.

Dual definition

The essence and types of receivables and payables are largely determined by the duality of the legal nature. The category is the property of the organization as one of the parts of the common property according to the right of ownership in relation to money or things received on loan. The considered economic category, being the object of legal obligations,represents the company's debts to creditors. Creditors are persons who have the right to claim or recover part of the property complex from the specified association.

Peculiarities of accounts payable

According to a simplified view, accounts payable is a type of obligation to creditors, something that an organization must pay to a legal entity or individual. A complete definition implies the totality of all the listed features. For example, accounts payable is a part of the common property of an organization, acting in the form of debt obligations arising from various legal grounds to creditors, that is, eligible persons.

Required aspects of accounts payable

It is worth remembering that all types of accounts payable of an enterprise are subject to accounting and should be reflected in the balance sheet.

The debtor can collect debts by force when the creditor does not take any action aimed at the voluntary return of debts. The collection procedure, depending on the type of accounts payable, can be both judicial and extrajudicial.

Different types of debts

Accounts payable currently means the creditor's debts of various origins. Since all types of accounts payable known from textbooks are vivid examples of sources of material resources at the disposal of the organizationand displayed in the liabilities side of the balance sheet. Accounting for the categories described in the article is kept separately for each loan. The summary indicators indicate the total accounts payable. It is issued only when the amount is divided into several groups.

Short-term financial improvement

The essence and types of accounts payable suggest that attracting borrowed funds into the organization's cash flow allows you to temporarily improve the overall financial condition of the structure. The main feature is that borrowed funds do not stay in circulation for a long time, returning according to the terms specified in the official contract.

Otherwise, an overdue type of receivables and payables of the enterprise arises. This implies the payment of a fine and the deterioration of the financial life of the company. For this reason, the composition and prescription, the causes and frequency of its occurrence of debt must be studied.

Free credit

According to its definition, all types of accounts payable are a free loan and are included in the category of cash and material resources involved in the turnover of the structure. Accounts payable, unlike stable liabilities, is not a planned source of working capital formation and is a short-term liability for an enterprise.

The considered part of the organization is determined by regularities, since it arises due to the peculiarities of the calculations. In spite ofthis, to the emergence of accounts payable leads to a violation of settlement and payment discipline. In fact, it is a consequence of non-compliance with the deadlines for filing documents and paying for goods and services.

Short-term type of loan

The type of accounts payable and receivable with the calculation of the short-term type used by the organization. To form such funds, internal sources are used. The organization accrues them daily according to different types of accounts. The maturities of obligations under these accounts payable do not exceed one month. The funds included in accounts payable, after being credited to the account, cease to be the property of the organization, since they are used only for the period specified for repayment of current obligations. According to their economic content, they are a kind of borrowed capital.

Classification of accounts payable by type

According to the current classification, accounts payable are divided into several types according to certain criteria:

• Suppliers and contractors.
• Transfer of premiums on the insurance property of the company.
• Transferring personal insurance premiums to employees.
• Promissory notes payable.
• Founders agree with the payment of income and other.

Depending on the legal regime and the legal basis, debts are divided into three groups:

• To the employees of the organization - for example, debts to paysalary.
• Before the budget and social funds.
• To partners and counterparties.

Debts are classified into two categories upon payment:

• Overdue - maturity dates have come.
• Not overdue - debts that have not yet matured.

The structure of accounts payable includes the debt of the organization:

• To suppliers and contractors.
• Before the state budget.
• To organizations and employees.
• Before state off-budget funds.
• To third-party creditors.
• According to issued loans and credits.

Distinguishing Features

Accounts payable, considered in the article, as a form of borrowed capital is determined by key characteristics:

• Acts as a free source of borrowed funds. Accounts payable as a source of capital formation allows to reduce its borrowing share and total cost.
• The duration of the financial cycle directly depends on the amount of debt. It affects the amount of cash needed to finance current assets. The larger the amount of debt, the less money the structure must raise to finance its own economic activity.
• The volume of economic activity of the organization, including the volume of manufactured and sold products, affects the tot althe amount of debt. The company's expenses increase as the volume of output increases, and accordingly, this leads to an increase in the amount of accounts payable.

The volume of all purchases made by the structure affects the amount of accounts payable. The factors specified in the contract with counterparties, the terms of settlement with suppliers and contractors, the policy adopted by the organization regarding the repayment of accounts payable, the saturation of the market with a specific product, the settlement system adopted in the structure, the quality and consistency of using the results of the analysis.

The quality and turnover of accounts payable increases in proportion to the increase in non-cash payments. The solvency and stability of the organization increases with a decrease in debt. Termination of the debt is carried out by the contractor.

Short-term debt

Classic short-term debt can arise both to individuals and to legal entities. The maturity of such debts does not exceed 12 calendar months.

There can be several situations in which short-term debt arises:

• When non-payment for goods sold, work performed or services rendered to contractors and sellers.
• To buyers according to advances received for future deliveries.
• To suppliers for deliveries not accompanied by an invoice-invoices.
• To employees involved in the payment of wages.
• On bank loans and short-term loans.
• Before budgetary and off-budget funds for various pen alties, contributions, fines, taxes and fees.

Long-term type of debt

Acceptable accounts payable is considered when its maturity has not yet come. Debts maturing in more than one year are considered long-term.

This type of debt includes:

• Long-term liabilities on loans issued by banking organizations and loans taken from other structures.
• Promissory notes and bonds maturing more than one year.
• Deferred tax liabilities.
• Long-term lease obligations.

Collection of overdue long-term debt is carried out in court after filing a claim filed by the creditor. Such debts are classified as problematic and are collected by court decision.