The accounts payable subsidiary ledger is a worksheet for all payables owed to a company's suppliers and helps provide internal accounting controls. Here's how it works.

You enter "Increase in accounts payable: $5,000" as a positive item. Added to the $95,000 income you get $100,000. You have to adjust for other activities as well, though.

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Accounts payable is considered a short-term liability, whereas accounts receivable is considered a short-term asset. In both cases, net income goes up or down even though no cash has been exchanged.

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