In that case, the journal entry in the books of James and Co would be as follows. Following are some of the strategies that you can adopt to optimize your business’s accounts payable. Delaying the payments for a few days would help Walmart Inc to hold more cash and thus eventually pay to its suppliers. As per the above journal entry, debiting the Cash Account by $300,000 means an increase in Cash Account by the same amount. Likewise, crediting Accounts Receivable by $300,000 means a decrease in the Accounts Receivable by the same amount. Inventory includes the raw materials needed to produce goods for sale or finished goods.

The normal balance shows debit in the accounts payable when the left side is positive. It means, according to the accounting equation, the assets for that accounts are higher than the sum of shareholders’ equity and liabilities. By contrast, imagine a business gets a $500 invoice for office supplies. When the AP department receives the invoice, it records a $500 credit in the accounts payable field and a $500 debit to office supply expense. As a result, if anyone looks at the balance in the accounts payable category, they will see the total amount the business owes all of its vendors and short-term lenders.

Types of normal balances for accounts payable

However, the accounts payable balance would decrease if there is a debit entry. Normalizing entries are typically made at the end of an accounting period to ensure that the financial statements accurately represent the normal balance of accounts business’s ongoing operations. These adjustments help remove distortions caused by extraordinary or non-recurring events, allowing for a more meaningful analysis of the business’s financial performance and trends.

For accounts receivables that are on the assets side, the normal balance is usually debit. But, for the accounts payable which are on the liabilities side, the normal balance is credit. This accounting equation is used to determine the normal balance of not only accounts payable but also accounts receivables.