slideshow 6 accounts payable transaction processing part i 5.2

Slideshow 6

Accounts PayableTransaction ProcessingPart I

5.2

List of TopicsList of Topics Slide Slide No.No.

The ACCOUNTS PAYABLE Module (Review) 3

GAAP Related to Accounts Payable

Matching Principle 4

Objective Evidence Principle 5

Unit of Measurement Concept 6

Cost Principle 7

Processing Vendor Invoices 8

Invoices with GST and PST 10

Invoices with Taxes Included 11

Using Distribution Set on an Invoice 12

Processing Credit Notes and Debit Notes 13

Processing Adjustments 15

Recurring Payables 17

The ACCOUNTS PAYABLE Module - Review

Click and review the types of Click and review the types of transactions processed in the A/P transactions processed in the A/P Module that you learned in the last Module that you learned in the last chapter.chapter.

Click to continue.Click to continue.

Types of Transactions in A/P ModuleTypes of Transactions in A/P Module

• Purchases

• Debit/Credit notes

• Adjustments

• Payments/pre-payments to vendors

• Cash disbursements, monthly payments

• Tax remittances

GAAP Related to A/P:

Matching Principle

In the next few slides, review GAAP principles you have already learned and study new ones that apply to Accounts Payable.

Click and study the first principle and Click and study the first principle and example below it.example below it.


Matching PrincipleMatching Principle

Expenses are matched with revenues in the period when efforts are made to generate the revenue.

ExampleExample

An accounting consultant, Faye Anderson, bought $600.00 worth of paper and printing supplies in December. She collected $2,800.00 consulting fees from her clients that month.

Faye entered $600.00 for paper and printing supplies as prepaid asset.

At the end of the month, she calculated that she used up $285.00 worth of the supplies she purchased earlier. When Faye prepares her monthly financial statement for December, she should report the $2,800.00 revenue and her expenses to earn the revenue, including $285.00 (not $600.00) for supplies.


Objective Evidence Principle

Click and review the principle and Click and review the principle and example.example.


Objective Evidence PrincipleObjective Evidence Principle

Each transaction is described by a business document that proves the transaction did occur.

ExampleExample

A business transaction should be recorded only if it actually occurred. The amounts recorded must be accurate and true.

One way to check the accuracy of specific accounting information is to look at the source documents, such as:

• Sales invoices for goods/services sold.

• Cheques for payments received.

• Deposit slips for funds deposited in the bank.

• Memos and other supporting forms.


Unit of Measurement Concept

Click and study the concept and Click and study the concept and example.example.


Unit of Measurement ConceptUnit of Measurement Concept

All business transactions are recorded in a common unit of measurement – the dollar.

ExampleExample

In order to be clear, business transactions must be recorded in a consistent manner using dollar values. Count of items, such as 100 units or 1 dozen, is not a good unit of measurement.

Cost PrincipleCost Principle

All assets purchased must be recorded in the company accounting records at their purchase price (historical cost).


Cost PrincipleClick and study the principle, then Click and study the principle, then read the example below. read the example below.


A computer bought for $3,000 is recorded as an asset at the time of purchase. If the value of that same computer decreased in price to $2,500 shortly after purchasing it, the value in the accounting records remains the same. Any change in the market value of the asset does not get reflected in the accounting records.

This principle is followed even when the value of the asset increases.

Example:Example:

Processing Vendor Invoices

When goods you ordered are delivered, the vendor sends you an invoice.

Click.Click.

On the back of the invoice, you would stamp the date when the invoice was received.

Click.Click.

After inspecting the goods and before the invoice is entered into the A/P system, the invoice is matched with the original purchase order to ensure that the goods received were as ordered and the price is as quoted. The invoice would then be approved with the date and account number to which the shipment should be recorded.

Click.Click.

Now there are three dates.

Question: Which date should you use as the transaction date?

Click to find the answer.Click to find the answer.


Received04/08/2010back

Processing Vendor Invoices (continued)

CCSL, our sample company, receives invoices from vendors for purchases on credit. The invoices are batched and entered on Thursday of every week.

Click.Click.

Each vendor invoice is a separate entry in a batch.

Study the DOCUMENT page of the A/P invoice entry as it relates to the vendor invoice.

Click the other tabs from left to right Click the other tabs from left to right starting from TAXES.starting from TAXES.

When finished, click to continue.When finished, click to continue.

The Distribute option for Tax Amount instructs ACCPAC to automatically distribute the Tax Amount that you enter on the detail line to GST PAID ON PURCHASES.

Calculate instructs ACCPAC to calculate the taxable amount of the invoice based on the detail lines entered on the DOCUMENT page.

The information on this page is automatically entered by ACCPAC according to previous setup entries. For example, TERMS was automatically taken from the particular vendor’s record (see right). ACCPAC calculated DUE DATE, DISC. DATE and DISC. AMOUNT according to the date of the invoice and the terms.

The information on this page is automatically entered by ACCPAC based on the previous pages. Make sure the OUT OF BALANCE amount is zero and DOCUMENT TOTAL is correct.

Discount available is shown, but will be taken out of the invoice total only when paid within the Discount Period.


Invoices with GST and PST

The invoice in the previous slide has only GST because it is for a purchase of merchandise for sale. Purchases of supplies for the company’s use and NOT for resale are subject to both GST and PST.

GST is recoverable, but not PST. PST is added to the amount of the expense, becoming part of the cost. ACCPAC automatically distribute the amount of PST to the same account as the amount of the purchase.

Click and study a sample of the Click and study a sample of the invoice entry for a purchase with invoice entry for a purchase with both GST and PST. Study the both GST and PST. Study the DOCUMENT page, then advance to DOCUMENT page, then advance to the other tabs, as usual.the other tabs, as usual.


PST is allocated after you have entered it in the TAXES page.

GSTPST is the code you entered for TAX GROUP that is subject to both GST and PST when you set up Tax services earlier (see right).

Undistributed Amount and Out of Balance amount must be zero.


Invoices with Taxes Included

Most commercial invoices show the amount of taxes separately from the amount of the purchase. However, occasionally invoices may have taxes included in the total amount. ACCPAC can automatically calculate what to record in the tax accounts and the purchase accounts.

Study the invoice at the right.

Click and study a sample of the Click and study a sample of the invoice entry for an invoice with GST invoice entry for an invoice with GST included. Study the DOCUMENT included. Study the DOCUMENT page, then advance to the other tabs, page, then advance to the other tabs, as usual.as usual.

Your text will give you step-by-step instructions.


Included Tax is filled in after you have completed the TAX page and the Account/Tax window.

Yes must be selected using the Account/Tax button so tax included amount is correctly calculated in the Taxes page.

Calculate (instead of the usual Distribute option) must be selected for Tax Amount.

ACCPAC automatically calculates Tax Amount.

Due Date and Disc. Date are calculated according to the Terms and Document Date.


Using Distribution Set on an Invoice

When you set up the A/P Module earlier, you defined the Distribution Set ADVERT. Remember that distribution sets are used to distribute an invoice to two or more Distribution Codes. Using ADVERT on an invoice will instruct ACCPAC to use the Distribution Codes ADPROD and ADSERV.

Click.Click.

Study the invoice at the top right. Notice the special note that $500 should be charged to the Service Department and $1,500 to the Product Department.

Click and study the DOCUMENT Click and study the DOCUMENT page of the invoice entry then click page of the invoice entry then click on the other tabs from left to right.on the other tabs from left to right.



Processing Credit Notes and Debit Notes

Study the difference between a credit note and a debit note.

Click.Click.

Debit and credit notes are recorded in an Invoice Batch similar to a regular invoice. Credit Note or Debit Note is selected as the Document Type on the Document Page.

Click and study the Credit Note on Click and study the Credit Note on the top right and the DOCUMENT the top right and the DOCUMENT page of the invoice entry.page of the invoice entry.

Study the invoice at the top right. Notice that GST is included.

Click on the other tabs from left to Click on the other tabs from left to right.right.



Difference Between a Credit and a Debit NoteDifference Between a Credit and a Debit Note

Credit Note: A document received by the company from a vendor which in effect decreases the amount of the vendor invoice which therefore decreases the company’s Accounts Payable (e.g., purchase return). It is called a credit note because it decreases the vendor’s Accounts Receivable (a credit in the vendor’s accounting records).

Debit Note: A document received by the company from a vendor which in effect increases the amount of the vendor invoice which therefore increases the company’s Accounts Payable (e.g., additional charges on goods purchased). It is called a debit note because it increases the vendor’s Accounts Receivable (a debit in the vendor’s accounting records).

Calculate is selected for Tax Amount and Tax base; Tax Included is set to Yes.

Original Invoice

Processing Credit Notes and Debit Notes

Study the Debit Note on the top right and the DOCUMENT page of the corresponding invoice entry.

Study the invoice at the top right. Notice that only GST is charged separately from the subtotal.

Click on the other tabs from left to Click on the other tabs from left to right.right.



Original invoiceDistribute is selected for Tax Amount and Calculate for Tax Base. Tax Included is set to No.

Processing Adjustments

After an invoice has been posted. You may find that a mistake has been made and a correction is required.

Click and study the common Click and study the common mistakes that can be easily corrected mistakes that can be easily corrected by making adjustments.by making adjustments.

If you have posted a transaction to the wrong vendor or you have selected the wrong document type, you can enter an adjustment making the original invoice amount to zero. You can then make the correct entry to the proper vendor or select the proper document type.

An incorrect document date or an incorrect purchase terms cannot be fixed using an adjustment. The A/P Control Payments window, which you will study in the next slideshow, may be used to change the due date, the discount date or the discount amount.


Common mistakes corrected with Common mistakes corrected with adjustments:adjustments:

• Incorrect amount.

• Incorrect taxes.

• Incorrect coding or distribution.

Processing Adjustments (continued)

Adjustments may be done in either of two windows:

• A/P Adjustments window.

• A/P Payments window.

You can use the A/P Payments window during the application of a payment to an invoice. You will now learn how to use the A/P Adjustment window.

Click and study the memorandum Click and study the memorandum and the original invoice to which it and the original invoice to which it refers.refers.

Click again to see the adjustment Click again to see the adjustment entry to make the correction.entry to make the correction.

Review the required adjustment again. PROD is entered in the Adjustment Entry for Distribution Code (see how you defined it earlier). This redistributes AMOUNT to two G/L accounts instead of one.


Recurring Payables

A payment made on a regular basis; e.g., rent, equipment leases, etc., can be recorded as a Recurring Payable.

First, you need to set up a Recurring Payable Code. You can then create a Recurring Payables Batch to process the payment when due. Using the Recurring Payable Code in the Recurring Payables Batch saves you entry time and avoid errors.

Our example is a Recurring Payable for monthly rent of $800.

Click and study the INVOICE page of Click and study the INVOICE page of the A/P Recurring Payables Code the A/P Recurring Payables Code window.window.

Click the other two tabs starting from Click the other two tabs starting from DETAILDETAIL

You can then use the RENT code whenever you pay rent.


You need to specify the vendor.

You have set up earlier in Common Services (see right).

Specify the monthly payment amount.

Rent is subject to GST.

Recurring Payables (continued)

Whenever rent is due, you can create a Recurring Payables batch using the A/P Periodic Processing desktop.

The only thing you need to change from month to month is the Run Date. Because you have used the MONTH1ST code, this procedure will work properly only if you set the Run Date to the first of the month.


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slideshow 6 accounts payable transaction processing part i 5.2

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