|
about e-ccounting
e-ccounting is a monthly
newsletter focusing on accounting tips and solutions.
Our mission is to educate our clients, students and
readers by offering these resources in response to
your ongoing questions.
It is our objective to
gather information and provide easy access for your
current and future needs.
Back-issues are
available on the accountrain website.
These tips are not complete answers to complex
questions. We therefore recommend, when in doubt,
contact the professionals or government
agency.
about accountrain
accountrain simplifies the client /
accountant relationship.
accountrain offers a unique
combination of knowledge and people-skills to solve
all your accounting needs.
accountrain specializes in the how's
and why's of accounting.
Is accountrain the right accounting
team for you?
Find out
more....
Pass It On !
Please forward this to anyone you feel may benefit
from some free accounting tips. They'll be
glad you did.
Sandy's Question Corner
Do you have an accounting question? Send it to us at
accountrain
Workshops:
accountrain is now offering a series of three
workshops. Take one, two or all three and save as you
learn. The informative and interactive format
guarantees a comfortable and fun learning
environment.
Details on the accountrain.com website.
The Topics:
1. Understanding How to Read Financial Statements
2. Accounting 101 - for new and small business
3. Year-end Prep & New Year Planning
For more
information or to register, email
accountrain
If you would like to see your ad here contact accountrain for more information about advertising in e-ccounting.
|
|
Business Scenario
- Accounts Payable - Part 1
|
| |
What's the best way to handle / record vendor activity?
|
| |
|
| |
| Answer |
| |
Vendor / supplier activity when dealing with receiving bills and issuing the payment / cheque (at a later date) are known in accounting as your Accounts Payable (A/P).
Please note that items paid by cash, debit cards, COD, etc. are usually entered as a journal entry. However, if they are regular vendors and you want to track their history, you can record these expenses as cash payments in Accounts Payable as well.
Accounts Payable is what's known as a sub- ledger, which was defined in the June 2009 issue of e-ccounting. In accounting software the Accounts Payable may be referred to as a module.
The accounting software is designed, once set-up properly, to automatically handle the Accounts Payable portion of the transaction (see definition section for more details on integrated accounts).
For a (vendor) bill the Accounts Payable is a credit while the GST (if applicable) and Expense are debits.
For the payment / cheque, the Accounts Payable is reduced or debited while the bank is a credit.
The A/P primarily has two components: Bills (discussed below) and Payments (to be discussed in the next issue).
Component 1 - Bills
When you choose the Purchases / Bill screen, it is divided into two sections; (a) general information including:
- Vendor name
- Invoice number (which is on the bill, if there isn't one, use a consistent numbering system. For example for credit cards and utility bills, the month and the year is a good simple system).
- Date of the bill
and (b) the bookkeeping portion of the screen will, as a minimum, require the following:
- Details of the bill (it's a good idea to put a brief description)
- The amount of the invoice (before taxes)
- The applicable taxes (GST, PST or both)
- The expense account name or number to attach the purchase.
Once you have completed the screen, if all the required fields have been entered you will post the entry. At this point all your reports will be updated.
There are two main reports available:
Summary
At any requested date, the report will itemize each vendor you have an outstanding balance with and how much you owe, as well as a grand total at the bottom. The report has a current column, over 30 days, over 60 days and over 90 days columns to track the aging of these outstanding balances.
Detail
At any giving date, you may request the specifics of one particular vendor. This report will provide each bill and payment therefore including both paid and unpaid items. |
| |
|
| |
| Accounting Tip |
| |
Bookkeeping Hint - when entering a multi- lined item ie. a credit card, and you are not ready to post but don't want to loose all your data, store it as a recurring or memorized entry. This way you can call it back up when you are ready to finish it. You can make your changes / additions and then post it.
When you have posted the item chances are you won't need it again, therefore to avoid a long list of one-time memorized transactions, delete it.
|
| |
|
| |
| Did You Know ? |
| |
As tempted as you may be to enter the purchase only after it is paid for, perhaps to save time (one transaction instead of two) this is not correct, as there are rules in accounting (GAAP) that transactions must be entered as they occur.
Therefore, there is one entry for the purchase and at a later date, when the payment is made, another entry for the cheque.
If this is unclear, please review it with an accounting expert.
|
| |
For more Did You Knows? |
| |
| Definition |
| |
Integrated Accounts
Also known as linked accounts, they are required when initially setting up your books. In order for the sub- ledgers (modules) to work, the system must have the following accounts created and linked to their proper modules:
- Accounts Receivable
- Accounts Payable
- bank for deposits and cheques.
With these accounts properly set up, the system will automatically do the following:
- When you are purchasing something "on account", from a vendor, the A/P will automatically be a credit (more information is needed, but this is just to stress the portion done automatically) and when you make the payment the A/P is a debit and the bank is a credit.
- When you are selling something "on account", to a customer, the A/R will automatically be a debit (more information is needed, but this is just to stress the portion done automatically) and when you receive the payment the A/R is a credit and the bank is a debit.
These automatic linked accounts will save a lot of time in data entry. |
| |
For more definitions ... |
| |
| Sandy's Recommendations |
| |
When you set-up the vendor take the time to enter as much information as you have, ie. full address, fax, phone number(s), a special contact name including their proper title and any other relavent information, ie special dates.
Pay attention to due dates, ie due upon receipt versus due in 30 days. If cash flow is an issue, take advantage by not paying things earlier than you have to, ie many items are due in 30 days. That said, to avoid late fees and continue good relations with the vendor avoid paying things late whenever possible.
|
| |
|
| |
|
Next Issue - Accounts Payable - Part2
|
| |
Learn:
The second component of the Accounts Payable (AP) - vendor payments/ cheques
- Hint on paying bills in other currencies, ie US or Euro.
- How to deal with necessary deposits required to open a vendor account.
- What are your options if you can't pay your bills when they are due.
- Options for filing vendor bills, once they are paid, for both small or large business
|
| |
|
| |
|
