In accounting, accounts payable is an important current liability that represents the amount of money that a business should pay to a businessman. In the balance sheet, the calculation method of accounts payable needs to be based on certain accounting standards and accounting systems. This article will detail how accounts payable are calculated and explain their impact on the financial health of a business.
1. Calculation method of accounts payable.
The calculation of accounts payable is usually based on the following two steps:
1.Identify accounts payable.
Accounts payable is the amount payable to the first merchant arising from the purchase of goods, the receipt of services and other business activities. In the balance sheet, accounts payable are often classified as current liabilities because it is usually due for settlement within a year or a business cycle.
2.Adjust accounts payable.
The calculation of accounts payable needs to exclude some items that should not be included in accounts payable. For example, long-term agreements or long-outstanding amounts between a business and a business company should not be included in accounts payable. Therefore, the amount of accounts payable on the balance sheet should be the short-term transactions and outstanding amounts between the enterprise and the ** merchant in an accounting period.
2. The impact of accounts payable on the financial status of the enterprise.
As a current liability of an enterprise, accounts payable has an important impact on the financial status of the enterprise. The following are the main impacts of accounts payable on the financial health of a business:
1.Liquidity ratio.
Accounts payable is one of the important factors in calculating the current ratio. The current ratio is the ratio of current assets to current liabilities of an enterprise, and is an important indicator to measure the short-term solvency of an enterprise. Accounts payable, as part of current liabilities, directly affect the calculation of the current ratio.
2.Funds are tied up.
An increase in accounts payable means an increase in the amount of money that the business occupies from the business. In this case, the business can use the funds for other business activities or investments, thereby increasing the profitability of the business. However, if there are too many accounts payable, it may affect the short-term solvency of the business, leading to risks to the financial situation.
3.Commercial credit.
Accounts payable is one of the manifestations of business credit. Good business credit can bring more business opportunities and competitive advantages to enterprises. At the same time, the management of accounts payable is also an important part of the commercial credit management of enterprises.
3. How to manage and control accounts payable.
The management and control of accounts payable is essential to the financial health of a business. Here are some ways to manage and control your accounts payable:
1.Develop a reasonable procurement plan and inventory management strategy to avoid excessive inventory backlog and the generation of unsalable goods, so as to reduce the occupation of accounts payable.
2.Establish a good cooperative relationship with the best businessmen, communicate and coordinate in a timely manner to ensure that the best business can supply goods in a timely manner and maintain a reasonable level.
3.Establish a sound internal control system to ensure the accuracy of accounts payable accounting and prevent false records or miscalculations.
4.By analyzing the age, amount and payment terms of accounts payable, the risk level of accounts payable is assessed, and corresponding risk control measures are taken.
5.Negotiate regularly with ** business partners to strive for more favorable payment terms and account term arrangements, and reduce the occupancy cost of accounts payable.
In summary, the calculation method of accounts payable has an important impact on the financial status of a business. Through scientific management and control methods, enterprises can reasonably reduce the occupancy cost of accounts payable, and improve the profitability and commercial credit level of enterprises.