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Paying accounts payable that are already included in a company s accounting records will not affect the company s net income.
Income statement expenses accounts payable. Generally speaking net income is revenues minus expenses under the accrual basis of accounting if an expense is associated with an accounts payable the expense will be recorded at the time the accounts payable is recorded not at the time of the payment. The accounts payable on the other hand is a liability account that never touches the income statement and goes straight to the balance sheet. The final report particularly the final net figure is incredibly crucial to the investment community. The expense will go on the 2014 income statement and the liability on 2014 closed balance sheet.
Learn more about balance sheet reporting standards at fasb. However the cash is not affected. Ae almost always correspond to operating expenses or other income statement expense items but accounts payable often do not. Accounts payable could be written off as expenses for example reserves as a result could be recognized in expenses of the period.
Concisely put the difference is that an expense is an income statement account that becomes a part of the balance sheet through stockholders equity. Accounts payable arising from operating expenses is usually short term and non interest. Therefore accounts payable is a critical metric to analyze when a company is up for consideration for possible merger or acquisition activity. The net income statement shows the company s revenues and expenses quarterly and yearly for the fiscal year.
A company s expenses are likewise included in a. Accounts payable ap sometimes referred simply to as payables are a company s ongoing expenses that are typically short term debts which must be paid off in a specified period to avoid. Accounts payable could be written off as expenses for example reserves as a result could be recognized in expenses of the period. Income statement contains info just about incomes and expenses.
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