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Principles and Learning Objective

Accounts payable
Most firms have accounts with their major suppliers (Vendors). The accounts Payable (A/P)-or simple “payables”-System is the transaction processing subsystem that handles payments to suppliers. It keeps track of invoices from suppliers, determines the optimum time to pay invoices, produces checks to pay invoices, and performs cash management activities (thereby ensuring that cash is always available when bills must be paid). Shows a data flow representation of the payables systems. A payable is a liability that is created as soon as goods (or services) are received from vendors. The invoices and statements are validated against the actual receipt of goods found in the receipt file and, if all of the information is in order, the payable is created on the books. At this point, as many as 30, 60, or 90 days may elapse before the bill is actually paid, depending on the terms of the vendor. As soon as the payment is made and recorded, the payable is closed out