Vendors and contractors are business entities that supply tangible goods (raw materials, supplies, spare parts, etc.), carry out works (construction and repair works, etc) and provide services (heating, water, gas, electric power, etc) that are essential for company operations.

Account 60, “Payments to Vendors and Contractors”, is used for keeping records of payments to vendors and contractors.

As a rule, in this account, they record payments for already accounted in the books tangible assets, completed works and provided services. All transactions associated with payments for purchased tangible assets, approved works or received services are recorded in Account 60, “Payments to Vendors and Contractors”, regardless of the time of the payment.

Companies choose their own form of payment for raw materials and products (goods and services) and specify their form in contracts concluded with vendors and contractors. As a rule, companies pay bills of vendors and contractors with payment orders.

Source documents that confirm payments to vendors and contractors are bills, invoices, delivery notes, acceptance certificates, payment orders, etc. Invoices from vendors and contractors must be recorded in the purchase ledger in chronological order as payments occur and as delivered goods and services are accounted in the books.

Cost of tangible goods (works and services) is recorded with a credit of account 60, “Payments to Vendors and Contractors”, and with a debit of accounts for recording these goods (accounts 08, 10, 15, 41, 43, etc.) or accounts for recording associated costs (accounts 20, 23, 25, 26, 44, 97, etc.). 

Costs of services of delivering tangible goods and  processing raw materials are recorded in Account 60, “Payments to Vendors and Contractors” and in related accounts that report production inventory, merchandise, production cost, etc (accounts 08, 10, 15, 41, 43, 20, 23, 25, 26, 44, etc.).

When tangible goods (works, services) are reported, the amount of VAT is excluded from their value and is recorded with a debit of account 19, “Value Added Tax of Purchased Goods”, and with a credit of account 60, “Payments to Vendors and Contractors”.

Payments of liabilities to vendors and contractors are recorded with a debit of account 60, “Payments to Vendors and Contractors” and with a credit of cash accounts.

The remitted amount of VAT is being written off from a credit of account 19, “Value Added Tax of Purchased Goods”, into a debit of account 68, “Payment of Taxes and Fees” (sub-account 68-1 “Payment of Value Added Tax”).

Nowadays, the amount of VAT, which a company pays when it purchases tangible goods (works, services), is deducted after being recorded in the books.

An amount of VAT can be deducted provided that source documents (including invoices) are filled out correctly and purchased tangible goods (works, services) are intended for production purposes or other operations, which are subject to VAT.

In accounting, operations of purchase of tangible goods (works, services) and payments for them are reflected with the following postings:

In cases, where a vendor bill was accepted and paid before goods were received and, during their collection in a warehouse, a shortage above specified in a contract amount was discovered, or if, during inspecting a bill of a vendor or a contractor, arithmetic errors and discrepancies in agreed upon in the contract prices were discovered, account 60, “Payments to Vendors and Contractors”, is credited and account 76 “Payments from debtors and to creditors” (sun-account 76-2 “Settlements of Claims”) is debited for the amount of discrepancy.

For uninvoiced receipts, account 60, “Payments to Vendors and Contractors”, is credited for amount of received goods, for which prices and terms are agreed upon in the contract.

Mutual settlements are posted in the books in a debit of account 60, “Payments to Vendors and Contractors”, and in a credit of account 62 “Receivables from customers and clients” or account 76 “Payments from debtors and to creditors”.

Within a group of affiliates, which operations are recorded in a consolidated accounting database, payments to vendors and contractors are recorded in account 60, “Payments to Vendors and Contractors”, separately.

In sub-ledgers of account 60, “Payments to Vendors and Contractors”, operations are recorded by each submitted bill, and planed payments are recorded by each vendor or contractor.

 In this case, organization of sub-ledgers must provide the following information about company liabilities:

-about accepted vendor bills and other payment documents, that are not due yet;

-not paid on time vendor bills;

-uninvoiced receipts from vendors;

-advanced payments to vendors;

-note payables to vendors, that are not due yet;

-overdue note payables to vendors;

-vendors that sell goods on credit.