Bills payable this expression is used in the fields of finance and accountings. It is an elder definition, and is more widely met in the English system of accounting than the American system. Bills payable is liability document and it shows the indebtedness of organization or an individual. When an individual or an organization makes a purchase of any goods or services received on credit. Fundamentally, in a deal of sale and purchase of goods, seller of goods require money. Therefore, it will draw a bill to purchaser of goods. Purchaser of goods will embrace the bill and gives back to seller of goods. It is called Bills Receivable for seller of goods and Bills Payable for purchaser of goods (drawee of bill).
Bills payable in the context of banking can be alse defined as the funds that a bank borrows from other banks. These loanwords are backed by collateral consisting of the bank's note of hand and a pledge of government securities. These are usually due in the quite short term and are used to supply liquidity to the receiving bank.(S. Bragg, 2018)
Bills Payable on the Balance Sheet
In the balance sheet short term bills payable have terms one year and are categorised under current liabilities in the balance sheet. Long term bills payable are due within more than one year from the balance sheet date and are classified as long term liabilities in the balance sheet.
In the bills payable accounting procedure are three phases,
- The business buys goods from a supplier and registers the liability as an accounts payable in the typical way.
- The business embrances the bill of exchange and relocates the liability to a bills payable account.
- The business makes the payment to the payee when the bill is featured on the date of maturity.
Diffrence between bills payable and accounts payable
Accounts payable is a category which belong to the category liabilitiesLiabilities are qoutas the company has to settle up to else parties. These qoutas normally appear while doing business. Therefore, accounts payable are qoutas that have to be settle up to else parties.(K, Haase, 2012) Bills payable pertains to the actual bill you receive from sellers or suppliers. For instance, when the supplier sends a bill for the shipment, that invoice is the bill payable. As well as monthly bills for light, water and other utilities. As accounts payable dealings commonly come with invoices or bills, it is usual to pertain to bills payable and accounts payable as if they were like the same thing. Companies like better to separate some of bills, for example locating utility bills in a different rubric of utilities payable. This is useful if the company wants to supervise its utility spending or contemplate its other costs apart from utility bills. (F. Sherman, 2018)
Drawing up the Balance Sheet
Different disparity among bills payable and accounts payable is that bills payable is not an entrance on financial statements. The debt presented by the invoices goes on the books as accounts payable. Regiter it in the "liabilities" sector of the balance sheet together with notes payable. The balance sheet is an equalization; the assets on one side must be always identical as the total liabilities plus the owners' equity. Every accounting entry with "payable" in the name is a liability. That can contain wages payable, salaries payable, interest payable and income tax payable.(F. Sherman, 2018)
- Bragg S., (June, 2011), Bills payable.
- Carter C., Bills Payable Meaning.
- Edwards J. D. & Company, (June, 1996) AccountsPayable, JDEdwards nr A7.3,(1-8).
- Haase K., (2012) How to harmonize the Intercompany Matching process in UPM? Financial Accounting, (7-8)
- Sherman F., (2018), The Differences Between Accounts Payable & Bills Payable.
Author: Natalia Bielak