How to Calculate Change in Accounts Payable for Jikoni Company in July

Question:

During the month of July, Jikoni Company received $88,000 from owners, paid $26,500 cash for inventory, and purchased $18,000 of inventory on account. How much is the change in the balance of the accounts payable account for the month of July?

Answer:

The change in accounts payable for Jikoni Company during July is $18,000. This represents the amount it has purchased on credit during this month.

Accounts payable is an important aspect of a company's financial management. It refers to the amount a company owes to its vendors for goods or services purchased on credit. In the case of Jikoni Company in July, the change in the balance of the accounts payable account is directly related to the purchases made on account.

When Jikoni Company purchased $18,000 of inventory on account, this action increased the accounts payable balance by the same amount. It is important to note that cash transactions, such as the $26,500 payment for inventory and the $88,000 received from owners, do not impact the accounts payable balance directly.

Therefore, the change in the balance of the accounts payable account for Jikoni Company in July is solely attributed to the $18,000 of inventory purchased on account. Understanding and managing accounts payable is crucial for maintaining healthy cash flow and vendor relationships in a business.