Accounts Payable & Receivable › Invoice Processing

Walk through the journal entry when a supplier invoice is recorded.

Intermediate

Answer

When an invoice is posted, you debit the expense or asset account (and any recoverable input tax) and credit accounts payable, increasing the liability. When it is later paid, you debit accounts payable and credit cash/bank, clearing the liability. This two-step accrual approach records the expense when incurred, not when paid.

On invoice ($1,000 + $100 VAT):
  Dr Expense           1,000
  Dr Input VAT           100
      Cr Accounts Payable      1,100
On payment:
  Dr Accounts Payable  1,100
      Cr Bank                  1,100

Real-world example A month-end review confirms expenses were booked when invoices were received, matching costs to the period they relate to.

Common follow-ups: Why credit AP instead of cash at invoice stage? | How does this support accrual accounting?

Payment Runs Reconciliations Invoice Processing