Key Concepts
When a business buys goods, services, or non-current assets, the supplier may grant credit — letting the business take them now and pay later. The credit period is usually 30 to 60 days.
When a business buys on credit, the amount it owes the supplier is called trade payables. Trade payables are a current liability — the business expects to settle (pay off) the amount within the next accounting period (usually one year).
Why buy on credit instead of paying cash?Buying on credit lets the business keep its cash longer and use it for other needs first — paying wages, buying more inventory, settling bills — before the supplier's payment falls due. A longer credit period means the cash stays in the business for longer, which is especially helpful for a small business managing its day-to-day spending.
Always name the supplier when recording a trade payable — e.g. Trade payables — Faizal — never just "Trade payables" on its own.
Payable = money still to be paid. A trade payable is created the moment you buy on credit, and it is removed when you finally pay the supplier (or return the goods).
Treating a credit purchase as cash paid. When goods are bought on credit, no cash leaves the business yet. The business records a trade payable (a current liability), not a payment — the cash is only recorded later when the supplier is paid.
Mixing up trade payables and trade receivables. A trade payable is money the business owes a supplier (a liability). A trade receivable is money a customer owes the business (an asset). Trade payables sit on the liabilities side.
Leaving out the supplier's name. A trade payable must always be tied to a named supplier. "Trade payables" with no name does not show who is owed the money.