“trade payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier” IAS 37 Provisions, Contingent Assets & Contingent Liabilities.
Payables are obligation to pay cash in the short term within 1 accounting period end. Payables are current liability of the entity. Payables arise when:
- It is probable that economic benefits in the form of cash will outflow from the entity to settle the obligation.
- Sum of money involved is known reliably.
Payables are financial liability. Payables should not be revalued, as value of $1 is always $1.
Following are the common type of payables.
1 Trade Payables
Trade payables arise due to purchase on credit from suppliers.
2 Dividend Payable
Dividend payables arise due to declaration to pay dividends to shareholders of the company.
3 Income Tax Payable
Income tax payable arises due to profit generated from trading and operating activities.
4 Sales Tax Payable
Sales tax payable arises due to excess of sales tax collected from customer over sales tax paid to suppliers.
5 Loan Payables
Loan payables arise due to short term loan borrowed from bank or other financial institution.
6 Account Payables
All above payables are collectively called as account payables. Usually SFP contains sum of all payables as account payables and provides reference to break up given of account payables in notes to the financial statements.
Account payables also include accrued liability (cash received but goods or services not delivered until period end) & accrued expense (good or services received but not invoice not received from the supplier until period end).