Journal Entry - Payment on Account

by Marvin
(Philippines)

paying an accountQuestion:
What would be the entries in the journal if the problem is like this: "made payments on account, 17,000.00" ?


Solution:

Here is the entry for a payment on account:

Debit: Creditors/payables 17,000
Credit: Bank 17,000

Payment to creditor/payable Mr. Bla Bla

Remember that any time you have a payment it means you are losing money, which means less cash in the bank, which means you credit this asset.

The corresponding entry, the debit, is to creditors. When you pay "on account" it means you are paying off an account (a debt) you have with someone. In other words, you are paying off a creditor/payable.

As this is a payment the entry would be recorded in the cash payments journal (CPJ).

Hope that helps.

For more info check out the lesson on paying off an accrued expense (i.e. paying off a creditor).

- Michael Celender
Founder of Accounting Basics for Students

Comments for Journal Entry - Payment on Account

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Journal
by: Anonymous

How do you do a journal entry for debtors paid £3000?

Dr Bank £3000
Cr Debtors £3000

This means the debtors paid us - the people who owe us money paid us.

Bank increases, so for an asset this is debit. And the value of debtors decrease - they owe us less. Debtors are also an asset so to decrease them we do credit.

- Michael
(editor)

What is the Journal Entry for a Payment on Account?
by: Priya

What is the journal entry for the cash paid to Manasa on account rupees 5000?

The journal entry for paying Manasa on account is the same as above:

Debit: Creditors/payables 5,000
Credit: Bank 5,000

This simply means that Manasa was someone we owed (a creditor) and now we are paying off this account.

Hope that helps!

- Michael Celender

Account Titles - Payment on Account
by: Anonymous

What account titles am I going to use for the phrase Paid 9000 on account?

It's the same as above:

Dr Creditors / Accounts Payable 9,000
Cr Bank 9,000

"Creditors," "Accounts Payable" or "Payables" are all fine for the debit (they all mean the same thing basically).

In the same way, "Bank" or "Cash" would both be fine for the credit.

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