Obligations that arise in the normal course of business through credit purchase of goods delivered or services rendered on open account are accounts payable. They are usually payable within the coming period and listed on the balance sheet under current liabilities. Accounts payable are usually stated at their gross invoice amount.
Purchase on Open Account → Account Payable
Formalized, unconditional written promises to pay creditors specified sums of money, generally with interest, at future dates (i.e., promissory notes) are notes payable. Those falling due in the following period are included under current liabilities. Notes payable commonly arise either from short-term borrowings owed banks on short-term loans or under special circumstances, such as from the settlement of accounts payable.
Any interest owed on notes payable is recorded to interest payable. Interest payable is the interest that has accumulated on a firm’s indebtedness and due for payment within the current accounting period.
Dividend payable is a liability created when a cash dividend is declared. Since declared dividends are usually paid soon after the declaration date, they are classified as current liabilities.
| Dividends Payable (Example) | ||||
| MyCo has 10,000 shares of common stock issued and outstanding. A €10 dividend is declared on 1 July and paid on 14 July 2017. | ||||
| 1 Jul 17 | Retained Earnings | 100,000 | ||
| Dividends Payable | 100,000 | |||
| To record the declaration of a cash dividend on 1 Jul 2017 | ||||
| 14 Jul 17 | Dividends Payable | 100,000 | ||
| Cash | 100,000 | |||
| To record the payment of a cash dividend on 14 Jul 2017 | ||||