Accounts Payable

These below lists are Accounts Payable Examples:

1. Raw Materials/Power/ Fuel Purchase Manufacturing Companies

To complete the manufacturing and production process, a manufacturing company needs raw materials, electricity, and fuel. So, these items which are consumed in large quantities cannot be purchased in cash and hence are bought on credit with a credit period generally of 30 days or more. As a result, suppliers of raw materials, power, and fuel will appear as Accounts due until payment is made.

2. Transportation and Logistics

Raw materials must be transported from the supplier's warehouse to the manufacturing location. Similarly, manufactured goods must be transported to a warehouse for storage or directly to the buyer's location. As a result, many forms of transportation (land, sea, and air) may be used, and in some circumstances, more than one method of transportation may be used. Rather than owning these cars and incurring other overhead costs, it is more convenient to employ logistics and transportation service providers.

Similarly, goods that must be imported or exported must go through a number of procedures in order to comply with local legislation. Additionally, these products may be needed to be held in a port warehouse. These services will necessitate the use of service providers with relevant experience. As a result, services such as clearing and forwarding agents will be required. Accounts payables are impacted and adjusted for whenever cash is paid in all circumstances where cash is not immediately paid to satisfy the services rendered.

3. Assembling and Subcontracting Works

Even if a corporation has its own production unit, certain procedures may need to be outsourced to another company. Because the other company may be an expert, or because the manufacturing company has the requisite resources or licenses to perform a specific task.

For example, Apple uses the services of companies in China for assembling its iPhone. Service payments pending to these Chinese companies will be a part of accounts payable in the books of Apple.

4. Traveling

Consider a firm that specializes in the installation and commissioning of telecommunications equipment throughout India. As a result, firm network engineers must travel on a regular basis. As a result, including a cab service that operates throughout India is advantageous. It will assist in lowering the project's cost.

5. Equipment

Telecommunications equipment and infrastructure are required by a mobile network operator. The items are provided to these network providers on a nearly six-month credit basis. Telecommunications equipment is complicated and uses cutting-edge technology. As a result, network providers with spectrum licenses rely on these companies to construct their infrastructure. They will only be able to serve a big number of people after that. For example, a Swedish gear manufacturer is a vendor to RCOM, providing required equipment and infrastructure, and is designated as an account payable until payments for services rendered are made.

6.Leasing

Continuing with the previous example of accounts payable, if we lease equipment instead of buying it, the payments owed to the lessor become part of accounts payable. Because of the high cost of the capital investment, a lease is considered an alternative. An airline operator, for example, leases planes from aircraft manufacturers.

7. Licensing

A person who has exclusive rights to a product grants a license to use that product in exchange for a fee, known as a License fee. Consider a business that wishes to implement antivirus or internet security software. For a set price, the licensor grants the right to use the software for a year on a specific number of systems.

The accounts payable process is often broken down into three key steps for most businesses:

• Step 1: Filling up a purchase order entails listing the things or services to be acquired as well as the price. A purchase order also includes any transaction terms and conditions, as well as delivery deadlines.
• Step 2: Taking care of a receiving report: The provider keeps track of the goods or services given as well as the payment owed to them. Receiving reports contain a lot of valuable information, so it's necessary to read them thoroughly.
• Step 3: Receiving and processing supplier invoices: After receiving an invoice, the company processes it for payment. As previously said, this entails going over each detail to confirm it corresponds to the goods or services actually obtained.