What is the journal entry for payment to vendor?

-This question was submitted by a user and answered by a volunteer of our choice.

As we all know, a payment is made when we purchase a good or service on credit or cash basis. In terms of a business, a vendor (supplier/creditor) is a person who sells goods to the company on a cash or credit basis with an agreement to receive the payment within a specified period.

This in turn affects the accounts payables as the vendors are the creditors of the company as well as considered a short-term liability and are recorded under the head of current liabilities in the balance sheet.


Journal entry for payment to the vendor

  1. At the time of purchase of goods
Purchase a/c Debit Debit  the increase in expense
To Vendor a/c Credit Credit the increase in liability

(being goods purchased from the vendor on credit)


2. At the time of payment for purchased goods

Vendor a/c Debit Debit  the decrease in liability
To Cash a/c Credit Credit the decrease in asset

(being payment made to the vendor)



XYZ Ltd. purchased goods from a vendor amounting to 60,000 on a credit basis in May and agreed to make the due payment in July. The journal entries in the books of XYZ Ltd. are as follows:

May Purchase a/c Debit 60,000
To  Vendor a/c Credit 60,000

(being goods purchased on credit from the vendor)


July Vendor a/c Debit 60,000
To  Cash a/c Credit 60,000

(being payment made to the vendor in cash)


Note: In case the company purchases the goods from the vendor directly for cash then only the following entry shall be passed in the books of accounts;

Purchase a/c Debit Debit the increase in expense
To Cash a/c Credit Credit the decrease in asset

(being goods purchased from the vendor for cash)



* indicates required