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New accountants book supplier bills but are unclear how payables move from invoice to payment, and which errors to watch for.
Each credit purchase credits the supplier ledger under Sundry Creditors with the full invoice value; payments, TDS and credit notes debit it. The closing balance is what you still owe.
One ledger per supplier, invoice number and date on every entry, TDS section and MSME status recorded in the supplier master.
A payables balance that agrees with supplier statements, with duplicate bills, missed TDS and MSME due dates caught before they cost money.
Accounts payable is the money a business owes its suppliers for goods or services it has received on credit. In Indian books it appears under the group Sundry Creditors, shown as a current liability, with one ledger account for each supplier. When you pay, the balance goes down; when a new bill arrives, it goes up.
How does a purchase on credit move from invoice to payment?
The usual path in an Indian business looks like this:
- Order and receipt. A purchase order is raised and the goods or services are received.
- Invoice booked. The supplier’s tax invoice is entered in Tally, Zoho Books or your ERP. The supplier’s ledger is credited.
- Approval. Someone checks the bill against the order and the receipt, and approves it.
- Due date tracked. The bill waits until its credit period ends, for example 30 or 45 days.
- Payment. The bank pays, after deducting any TDS that applies. The supplier’s ledger is debited.
A worked example with GST
On 4 October a trader buys stock worth ₹50,000 plus 18 percent GST of ₹9,000 from a supplier in the same state. The invoice total is ₹59,000.
Entry on 4 October (purchase booked):
| Account | Debit | Credit |
|---|---|---|
| Purchases | ₹50,000 | |
| Input CGST (9 percent) | ₹4,500 | |
| Input SGST (9 percent) | ₹4,500 | |
| Supplier ledger (Sundry Creditors) | ₹59,000 |
Entry on 18 October (payment by NEFT):
| Account | Debit | Credit |
|---|---|---|
| Supplier ledger (Sundry Creditors) | ₹59,000 | |
| Bank | ₹59,000 |
After 18 October the supplier’s balance is nil. For the 14 days in between, ₹59,000 sat in accounts payable. We have assumed no TDS applies to this purchase of goods; if the buyer’s purchases from this supplier crossed the TDS threshold for goods, a small deduction would reduce the bank payment.
How is accounts payable different from similar balances?
| Balance | What it is | Example |
|---|---|---|
| Accounts payable (Sundry Creditors) | Billed amount owed to a supplier | Unpaid ₹59,000 stock invoice |
| Accrued expenses | Cost incurred but not yet billed, or not a supplier bill | Electricity used in October, bill comes in November |
| Bills payable | A formal accepted bill of exchange or promissory note | A 90-day bill accepted in favour of a supplier |
| Advance to suppliers | Money paid before the bill, so it is an asset | ₹1,00,000 paid before machinery is delivered |
The last row matters. If an advance is booked in the supplier’s own ledger, that ledger shows a debit balance until the bill arrives.
What goes wrong in payables, and which control catches it?
| Problem | What happens | Control that catches it |
|---|---|---|
| Duplicate bill | The same invoice is booked twice, once from email and once from a courier copy | Block repeat supplier invoice numbers in the accounting system |
| TDS missed | A contractor or professional is paid in full and the deduction is missed | TDS section recorded in the supplier master, checked at payment |
| MSME due date missed | A registered micro or small supplier is paid late | MSME status in the supplier master and an ageing report by due date |
| Rate or quantity mismatch | The bill is higher than the order or receipt | Compare PO, GRN and invoice before approval |
| Unbooked bills | The supplier’s statement shows invoices you never entered | Monthly vendor reconciliation |
The MSME point carries a tax cost. Under Section 15 of the MSMED Act, 2006, buyers must pay registered micro and small suppliers within the agreed period, which cannot exceed 45 days, or within 15 days where nothing is agreed. From FY 2023-24, Section 43B(h) of the Income-tax Act, 1961 tied the deduction for such purchases to paying on time. The articles linked below explain how this works today.
What to read next
- What is vendor reconciliation shows how to check a supplier’s statement against your ledger.
- How do I know if my vendor is MSME registered explains the Udyam check.
- What is the Section 43B(h) MSME 45-day rule explains when late payment affects your tax.
- For keeping supplier balances reconciled as volumes grow, see account reconciliation software India.