The sale is genuine and the clothes are needed: Bill's role is shifting and the wardrobe has to follow. At the till the store offers Buy Now, Pay Later. Three instalments of 150, no interest, and the first is not due until November. Bill takes it.
In September, nothing leaves his account. It feels close to free. The ledger disagrees. The day he signs, 450 of debt lands on his balance sheet, and his net worth falls by the full amount, not by the 150 he has not even paid yet.
Buy Now, Pay Later is a liability. Bill receives the goods now and promises to pay later, and that promise is a debt: a present obligation to hand over cash in the future, arising from a past event, the purchase. Accounting recognises it the moment the obligation exists, not the moment the cash moves. So the 450 is booked in full in September, against the cost of the clothes, even though the account is not touched until November.
This is the mirror of last month's certification. There, a cost hit the income statement with no cash leaving, because amortisation is non-cash. Here, a cost hits the income statement with no cash leaving because the cash is merely deferred. Both break the reflex that spending means a lower bank balance. In September, Bill's cash does not fall and his net worth does, by 450.
The category is recurring liability exposure. One instalment plan is easy to carry. The risk is the habit: every sale, every offer to pay in three, adds a thin stream of future instalments that overlap and accumulate, each one invisible in the month it is signed because no cash moves. What looks like a free deferral is a liability that renews the same illusion every time it is used.
Two entries record it. On purchase, a clothing expense of 450 is recognised and a BNPL payable of 450 is created: the cost is Bill's now, the cash is the store's later. No money moves in September. From November each 150 instalment is a second entry, reducing the payable and the cash together, until the debt clears in January. For the first time, Bill's current liabilities are not zero. They are 450.
The tip
A deferred payment is still a payment. The day you sign a Buy Now, Pay Later plan, the whole amount is a debt, not the first instalment. Record it in full when you commit, not when the money leaves, or your balance sheet will flatter you for exactly as long as the deferral lasts.
Recurring liability exposure, September 2026: 450 of work clothes bought on Buy Now, Pay Later, three interest-free instalments of 150, first due 1 November. Booked in full in September as clothing expense 450 and BNPL payable 450, with no cash movement until November. Current liabilities move from 0 to 450. Cash 4,712 after August's surplus, net assets 7,013.50.
Bill is 26. Every episode, we read his personal ledger through accounting eyes. / FY 2026 ledger