Absolutely any association in the process of economic activity can play the role of a supplier (executor) or customer. When making settlements on its accounts, as a rule, both payables and receivables are formed. In this article, it is advisable to consider the concept and types of payables and receivables. In addition, it is important to study the currently relevant aspects regarding the first category.
Features of debts
For a full understanding of such a category as accounts payable, it is advisable to consider the corresponding system as a whole (namely, the concept, features, types of accounts receivable and accounts payable of an enterprise).
Today, accounts receivable is defined as the debt of other associations, employees and citizens of this structure. In other words, it is the debt of buyers for the purchased product, services rendered or work performed; debt of persons of accountable value for the amount of cash issued to them. It is important to know that individuals and organizations that owe a certain amount of cash to a given organization are called debtors.
Accounts receivable: classification
It must be emphasized that accounts receivable are endowed with a fairly extensive classification. So, in accordance with the content of obligations it is customary to distinguish the following varieties of category:
- Debt that is directly related to the sale of marketable products, works or services.
- Debt that is in no way connected with the sale of marketable products, works or services.
When considering the types of receivables and payables, it should be noted that the duration criterion involves the division of receivables into long-term and short-term, which is often called current in modern literature. In accordance with such a factor as timely payment, the following types of debt are distinguished:
- Normal
- Overdue (sometimes hopeless and doubtful).
The concept and types of accounts payable
Accounts payable as an independent category of legal significance is a special part of the general property complex of the structure, which is the subject of a binding relationship between the association and its creditors. It is important to note that the economic aspect, one way or another, consists of part of the organization’s property (we are talking mainly about cash) and inventory items. It must be remembered that the structure uses and owns all currently relevant types of accounts payable, however, in one way or another, it undertakes to pay or return the corresponding part of the property complex to creditors. The latter are vested with the right to demand the performance of the obligation presented.
The dual nature of accounts payable
From the materials of the previous chapter, we can conclude that the nature and types of accounts payable are determined by a dual legal nature. In other words, as part of the total property complex, the category belongs to the organization in accordance with the right of ownership in relation to things or money received by the borrowed method.On the other hand, as an object of legal relations of a binding nature, the economic category in question is nothing but the organization's debts to creditors. It is important to note that the latter are the persons vested with all the rights to recover or claim from this association the indicated part of the common property complex.
Features of accounts payable
In accordance with a simplified aspect, accounts payable are a type of obligation to creditors; that this organization owes to other individuals or legal entities. A full definition of the category in question involves the mandatory consideration of the above characteristics. Thus, accounts payable is a part of the organization’s total property complex, which is the subject of debt obligations of the debtor association arising in accordance with various legal grounds to direct creditors (authorized persons).
Accounts payable - a must
It is important to know that all types of accounts payable existing today are, one way or another, subject to accounting and, of course, are reflected in the balance sheet. They are reflected as debts of the balance-holder association.
Then, when the creditor structure does not intend to take any actions related to the voluntary return of debts, the debtor has the opportunity to collect them in a forced manner. It is important to add that, depending on the type of accounts payable today, there is both a judicial and an out-of-court procedure.
Debt obligations of various origins
It is interesting to know that the definition of accounts payable currently covers those debt obligations of the creditor association that are of various kinds. Since the currently known types of accounts payable serve as bright sources of cash or other tangible assets at the disposal of the organization, they are present in the liability of the balance sheet. It must be added that the accounting for the category analyzed in the article is carried out in accordance with each creditor individually. The indicators of a generalizing nature reflect the total amount of accounts payable. By the way, it is given only subject to separation into certain groups.
Temporary improvement in financial condition
The concept and types of accounts payable, its features at the present stage of economic development suggest that attracting borrowed money or other tangible assets into the structure’s turnover is a phenomenon that in any case implies a temporary improvement in the general condition of the organization in financial terms. The main condition here is that the borrowed funds are not frozen for a long period in circulation - they are returned at the time that is determined in accordance with the official agreement.
You need to know that otherwise there is a threat of an overdue type of accounts payable of the enterprise. This situation, as a rule, involves the payment of a certain amount of a fine, as well as a significant deterioration in the financial life of the structure. That is why when managing, it is imperative to study the statute of limitations, the composition of accounts payable, as well as the presence, causes and frequency of its formation.
Free loan
All types of accounts payable of the organization, in accordance with their essence, are free credit and belong to the category of cash and other tangible funds attracted by the structure in economic turnover.It should be noted that unlike liabilities of a stable nature, accounts payable are not a planned source of the formation of working capital assets. One way or another, it serves as a short-term liability of the enterprise.
It is interesting to note that part of the structure under consideration is determined by the natural nature, because it appears, as a rule, due to certain features of the calculations. Nevertheless, accounts payable mostly arise as a result of a violation of the settlement and payment discipline. So, it acts as a result of non-compliance by the structure of the actual payment deadlines for the product and the submission of settlement documentation.
Short-term type of borrowed funds
The category under consideration characterizes the most short-term variety of borrowed funds used by the structure. You need to know that this money is formed from sources of internal significance. Their accrual in accordance with various types of accounts is carried out by the organization on a daily basis. Repayment of obligations on this payable is made at specific dates, where the range, as a rule, does not exceed a month period. Since, after accrual, the funds included in accounts payable no longer belong to the organization’s property, but only apply before the due date for repayment of actual obligations, in accordance with their economic content they are one of the varieties of borrowed capital.
Accounts payable classification
In this and subsequent chapters, it will be appropriate to consider the main types of accounts payable. Today it is customary to allocate debts for:
- To contractors and suppliers.
- To transfers of contributions in accordance with the property insurance structure.
- Transfer of contributions in accordance with the personal insurance of employees.
- Bills payable.
- Founders in accordance with the payment of income and so on.
So, depending on the legal nature and legal regime, the category in question is reduced to three groups:
- In front of social funds and the budget.
- To employees (for example, wage arrears).
- Before contractors and partners.
According to the criterion associated with the fact of the payment onset, the debt is:
- Unexpired (debts whose maturity dates did not come at the time the balance sheet was formed).
- Overdue (maturity has come).
What else?
You need to know that in the structure of accounts payable it is customary to distinguish the debt of the association:
- To contractors and suppliers.
- Before employees and organizations.
- Before extrabudgetary funds of a state nature.
- In front of the budget.
- In accordance with the loans and credits received.
- To other creditors.
Features of accounts payable
The category considered in the article as a form of borrowed capital is determined by the following key characteristics:
- It is a free source of borrowed funds. Being a free source of capital formation, accounts payable provide a certain decrease not only in its borrowed share, but also in the total cost of capital.
- The size, one way or another, affects the length of the financial cycle of the structure. It influences to some extent the required amount of cash in order to finance current assets. The larger the relative value of the category in question, the less money the structure needs to attract for ongoing financing of its own economic activity.
- The full amount of debt directly depends on the volume of economic activity of the structure (first of all, on the volume of output and sale of the product).It is important to note that with an increase in the volume of production and sale of marketable products, the expenses of the organization, which are charged as part of the debt, increase. So, the total amount of accounts payable increases, and vice versa.
It is important to emphasize that the size of the category in question is affected by the volume of all purchases, as well as the corresponding percentage of acquisition under the terms of subsequent payment. In addition, factors accompanying the execution of contracts with contractors have a considerable influence; terms of settlements with contractors and suppliers; market saturation level with this product; payables repayment policy; consistency in the application of the results of the analysis of the category in question, as well as its quality; settlement system adopted in the structure.
It is important to note that in the case of an increase in non-cash payments, the quality and turnover of accounts payable increases proportionally. Its size decreases, therefore, the stability and solvency of the structure is significantly increased. In addition, accounts payable may be terminated by the contractor, as well as debited as unclaimed.