Is Accounts Payable Increase A Debit Or Credit?

The above equation helps to put into perspective the identification of whether an increase in accounts payable should be debited or credited.

Accounts payable is one of the key current liability accounts that help a business measure the amount of money it has to pay its suppliers or vendors. It is placed in the balance sheet under current liabilities. When a business buys something from another business on credit, then an accounts payable is opened for the amount till it is fully settled.

This is the overall ability of the business to obtain goods and services on credit and has more payable to make. As accounts payable is an account of the liability side, an increase was recorded as a credit. Here's why:

Double-Entry Accounting System

Accounting uses the double-entry system for entries. This is where every transaction is balanced by debiting an equal amount to a certain account as is credited to another equal amount to another account. A debit operates to increase the asset/expense accounts whereas a credit operates to increase the liability, equity, and revenue accounts.

For accounts payable in particular:

- When a business acquires inventory through purchase on a credit basis, then it will increase the value of the asset account known as inventory. This increases assets.

- To illustrate, the following credit causes the accounts payable liability account to go up. This creates a liability to the supplier in the amount that is to be paid.

Hence, an increase in the accounts payable refers to the credit purchase of inventories or services. Bigger credit purchase means that businesses owe vendors more money thus accounts payable increases. This increase in a liability account is recorded as a credit.

Think "LICO"

Liabilities, Inventory, Costs/Expenses = Left Side Debit
Income, Owners’ Equity, Assets = Credit Current assets = cash and credit Total credit = assets < Current liabilities

Therefore, whenever the liability account account payable increases, the credit entry is made. Therefore, the reason behind posting an increase as a credit applies to all liability accounts – not only the accounts payable.

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