Recognizing supplier payables is one thing; it’s another to pay those payables however. We’ll discuss separately all the routines governing the handling and an appropriate approach when it comes to supplier invoices (i.e. how you ensure that you’re paying for the right service or material, in the right price and in due time), as it is, with this we want to give you an overview of which accounting entry you make within your books when you’re paying to your suppliers. 

Taking our previous example, say you’re now going pay for those bread units and you owe to your supplier 150 CU. Note here that the VAT is still paid to your supplier who himself declared it with the tax authorities as VAT payable. For you the amount payable is still 150 CU.

Note that with a credit you increase your liabilities, but with a debit you’d show the increase in a respective liability account.

It’s important to note that the Payable to suppliers shouldn’t just be a total amount on your balance sheet, but actually have a detailed ledger behind it showing balances by suppliers you owe to. This way you know exactly which invoices and to whom are still outstanding and which have been paid.