Video: Recording Accounts Payable

In this lesson, join Nick Palazzolo, CPA, as he demystifies the recording of accounts payable with a concrete example to illustrate the gross method of accounting for discounts. Horatio Company's purchase of inventory and the ensuing accounting entries serve as a foundation for understanding terms like “310 net 30” and the implications of early payment discounts. Nick breaks down the journal entries associated with purchasing on credit and the financial impact of utilizing these discounts effectively. He also extrapolates the fundamental concepts to another situation involving a note payable and interest expenses, to reinforce the accounting treatments and the rationale behind these common business transactions. This lesson lays out the step-by-step process of recording liabilities and managing cash flows, ensuring that these essential principles are crystal clear.