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Accounts Payable is an area that can handle many transactions. Those transactions can potentially impact a number of different areas on the financial statements.
We can enter a bill to pay a pre-paid expense, which is an asset on the balance sheet.
We can purchase a Fixed Asset. We saw how this works in the lesson on the Expense Cycle.
We can purchase inventory. We saw that in the previous lesson, but we’ll do it again in this one.
Finally, we can of course book a bill for a good old fashioned expense.
Out of the above, only one transaction impacts the income statement!
Watch the video to see what this looks like.