Final answer:
Accounts payable is increased with a credit entry when a purchase is made on credit. The increase in accounts payable defers the cash outlay and can affect the country's current account balance at the time of payment.
Step-by-step explanation:
When a purchase is made, and goods or services are received on credit, accounts payable is increased with a credit entry. Accounts payable represent the amount the company owes to its suppliers or creditors for purchases made on credit. A credit to accounts payable reflects an addition to what the company owes. It is only when the company pays off its obligations that accounts payable will decrease, which would be recorded with a debit entry.
The increase in accounts payable has implications for the company's cash flows and current account. If more monies are flowing out of the country, such as making payments for imports, it will affect the current account balance negatively. However, as accounts payable increase, the actual cash outlay is deferred to a later time, impacting the current account balance at the time of payment.
Understanding the relationship between accounts payable, cash flows, and the current account is crucial for financial analysis and management within a business context.