Journal Entry: Payment on Account
What would the journal entries be if the problem is like this: "Made payments on account, 17,000" ?
Here is the journal entry for a payment on account:Debit: Creditors/Accounts Payable 17,000
Credit: Bank 17,000Payment to creditors/payables
Remember that any time you have a payment it means you are losing money, which means less cash in the bank. Cash or bank is an asset
, which increases on the left side (debit) and decreases on the right side (credit). Since it is decreasing we will credit
The corresponding entry, the debit
, is to creditors.
When you pay "on account" it means you are paying off an account you have with someone, meaning, a debt. In other words, you are paying off a creditor. Creditors are liabilities
, which increase on the right side (credit) and decrease on the left side (debit).
FYI creditors are also known as accounts payable
or simply payables.
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 full lesson on accounts payable journal entries
(i.e. paying off creditors).
See the comments section below for more questions about payments on account.
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