1. Slideshow 9 Accounts Receivable Transaction Processing Part I 5.2

2. List of Topics Slideshow No. The ACCOUNTS RECEIVABLE Module (Review)3 GAAP Related to Accounts Receivable Matching Principle 4 Realization of Revenue Principle 5 Objective Evidence Principle 6 Unit of Measurement Concept 7 Processing Customer Invoices 8 Processing Credit Notes and Debit Notes 12 Processing Adjustments 13 Processing Receipts from Customers 15 Miscellaneous Sales 17 Out-of-Province Sales 18 Prepayment 19 Deposit Slips 21 Recurring Charges 22 Processing Write-Offs 24 Generating an Interest Batch 25 Customer Activity 27 Printing Customer Statements 28 A/R Period-End Processing 29 Clear A/R History 31 Post A/R Subledger Batches in G/L 32

3. The ACCOUNTS RECEIVABLE Module - Review Study the types of tasks you would perform in the A/R Module. Click to continue. In A/R, on a regular basis (daily, weekly or semi-monthly), you will: Enter customer invoices, debit notes and credit notes. Process adjustments to customer accounts. Enter customer receipts and other cash receipts. Review customer activity. At month-end /year-end you will: Process recurring charges. Charge interest on overdue customer accounts. Write-off customer accounts as necessary. Produce summary or detail reports for customer transactions and balances.

4. GAAP Related to A/R: (Review) Matching Principle There are four main principles you need to remember when recording transactions related to Accounts Receivable. You may have learned them in previous lessons, but it is best to review them at this point. Click and study the first principle and example below it. When finished, click to continue. Matching Principle Expenses are matched with revenues in the period when efforts are made to generate the revenue. Example 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.

5. GAAP Related to A/R: ( Review) Realization of Revenue Principle Click and review the principle and example. When finished, click to continue. Realization of Revenue Principle Revenue from business transactions is recorded at the time goods or services are sold. Example Some businesses sell goods or services for cash only; other businesses sell goods or services on one date and receive payment from customers on a later date. If a customer buys merchandise on June 1 and pays on July 15, the vendor records the sale on June 1, not on July 15 when payment is received.

6. GAAP Related to A/R: (Review) Objective Evidence Principle Click and review the principle and example. Click to continue. Objective Evidence Principle Each transaction is described by a business document that proves the transaction did occur. Example 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.

7. GAAP Related to A/R (Review): Unit of Measurement Concept Click and study the concept and example. Click to continue. Unit of Measurement Concept All business transactions are recorded in a common unit of measurement – the dollar. Example 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.

8. Processing Customer Invoices Before goods and/or services are delivered to the customer, the sale is entered in the A/R system. An invoice is then printed and sent to the customer. In this example, you are charging Telefornia Inc for repair services and parts.Click. Study the DOCUMENT page of the A/R Invoice Entry. At the bottom is the printed customer invoice. It is specially formatted and pre-printed with the company information in order to make the invoice look professional. The invoice form has been designed to the format specifications of ACCPAC.Click. Study the relationship between the DOCUMENT page and the printed invoice. Click the other tabs from left to right starting from TAXES. Click to continue. By leaving “NEW”, ACCPAC will assign the next available invoice no. in the system.

9. Processing Customer Invoices Before goods and/or services are delivered to the customer, the sale is entered in the A/R system. An invoice is then printed and sent to the customer. In this example, you are charging Telefornia Inc for repair services and parts.Click. Study the DOCUMENT page of the A/R Invoice Entry. At the bottom is the printed customer invoice. It is specially formatted and pre-printed with the company information in order to make the invoice look professional. The invoice form has been designed to the format specifications of ACCPAC.Click. Study the relationship between the DOCUMENT page and the printed invoice. Click the other tabs from left to right starting from TAXES. Click to continue.

10. Processing Customer Invoices Before goods and/or services are delivered to the customer, the sale is entered in the A/R system. An invoice is then printed and sent to the customer. In this example, you are charging Telefornia Inc for repair services and parts.Click. Study the DOCUMENT page of the A/R Invoice Entry. At the bottom is the printed customer invoice. It is specially formatted and pre-printed with the company information in order to make the invoice look professional. The invoice form has been designed to the format specifications of ACCPAC.Click. Study the relationship between the DOCUMENT page and the printed invoice. Click the other tabs from left to right starting from TAXES. Click to continue. Terms Code is automatically entered from the A/R Customer record (see right). Due Date, Discount Date and Discount Amount are calculated according to Invoice date and terms. Discount available is not reflected on the invoice, as it is taken by the customer only if the customer pays within the discount period.

11. Processing Customer Invoices Before goods and/or services are delivered to the customer, the sale is entered in the A/R system. An invoice is then printed and sent to the customer. In this example, you are charging Telefornia Inc for repair services and parts.Click. Study the DOCUMENT page of the A/R Invoice Entry. At the bottom is the printed customer invoice. It is specially formatted and pre-printed with the company information in order to make the invoice look professional. The invoice form has been designed to the format specifications of ACCPAC.Click. Study the relationship between the DOCUMENT page and the printed invoice. Click the other tabs from left to right starting from TAXES. Click to continue. CCSL does not keep records of salespersons in the A/R system, therefore, this page would be blank. The Document Total should match the Total amount on the invoice. The Discount available is taken by the customer only if the customer pays the invoice within the discount period.

12. Processing Credit Notes and Debit Notes Study the difference between a credit note and a debit note.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. Study the invoice at the top right. Notice that taxes are based on the returned goods and not on the total invoice. Study the DOCUMENT page of the A/R Invoice Entry.. Click on the other tabs from left to right. When finished, click to continue. Difference Between a Credit and a Debit Note Credit Note: A document issued by a company to a customer for many reasons: The customer may have returned goods. The customer may have requested an allowance due to a problem; e.g., damaged goods. The original invoice may have been incorrect. A credit note in effect decreases the amount of the customer invoice which therefore decreases the company’s Accounts Receivable (a credit in a vendor’s accounting records). Debit Note: A document issued by a company to a customer which in effect increases the amount of the customer. It is called a debit note because it increases the company’s Accounts Receivable (a debit in a vendor’s accounting records). Credit Note is selected as Document Type. GSTPST has been entered in the customer’s record (see left) and is automatically entered in the TAXES page. GST and PST are calculated automatically. CCSL does not keep a record of salespersons’ data; therefore, this page is blank. The amounts on the TOTALS page must correspond with those on the invoice.

13. Processing Adjustments After an invoice has been posted. You may find that a mistake has been made and a correction is required. Adjustments may be used in A/R only for errors that do not affect the customer balance; e.g., incorrect distribution. This affects only the company files, but does not warrant contacting the customers. Errors that affect the customer balance need to be corrected with a debit or credit note. There are two adjustment methods available. Either use the: Adjustment Entry window; or Receipt Entry window to write off or adjust amounts while processing a customer payment (referred to as receipt). Click and study the memorandum and the original invoice to which it refers. Click again to see the adjustment entry to make the correction.

14. Processing Adjustments(continued) Notice that in the first entry line of the Adjustment Entry, a debit is made on PRODUCT SALES REVENUE, which was credited on the original invoice, since it is a revenue account. This in effect changes the amount to zero.Click. A credit then is made to SERVICE REVENUE, the correct G/L account, since the invoice was for a hard drive installation. Click to continue.

15. Processing Receipts from Customers CCSL uses the open item method of accounts receivable, which means that every receipt is matched with a specific invoice. The other method is balance forward receipts where receipts are applied to the oldest invoices, which could be more than one.Click. Study the receipt types available in ACCPAC. You would normally enter all receipts regardless of type in one batch, making sure that the total receipts match your control total (sum of all receipts added manually). You can then print a deposit slip. Click to continue.

16. Processing Receipts from Customers (continued) Study the customer cheque at the right and the corresponding A/R Receipt Entry. Notice the stamps on the back of the cheque.Click. Study how the information on the cheque is entered in the A/R Receipt Entry window.Click. Be sure that the Unapplied Amount is zero; otherwise, it will result in an ERROR batch. Click to continue.

17. One-time customers not expected to be ongoing customers. Cheques that are not related to sales, e.g., tax refunds, manufacturers’ rebates, employee loan repayments, purchase refunds, investment proceeds, etc. Cash sales from walk-in customers or counter sales. Miscellaneous Receipts Processing Receipts from Customers (continued) Miscellaneous Receipts - Cash Sales You may receive payments that do not apply to an invoice in the A/R files. When entering this type of transaction, you would select Miscellaneous Receipts for Transaction Type. Study the types of transactions that fall under Miscellaneous Receipts.Click. Study the memo regarding a cash sale. Remember, there was no invoice recorded previously for this transaction. Below is the corresponding A/R Receipt Entry. Notice the selection for Transaction Type.Click. Also notice the difference from the A/R Adjustment Entry window when Receipt is entered as Transaction Type. Click to continue.

18. Out-of-Province Sales When you sell to other provinces with a different taxation scheme, you need to charge the corresponding taxes. In our example, Best Software is located in New Brunswick. You need to charge Best Software HST (Harmonized Sales Tax) at the rate of 15%. First, you need to add the information for HST in Tax Services which you learned in Chapter 3. There are three entries required to add HST information.Click. Study the Tax Class entry for HST.Click. Study the corresponding Tax Rates entry.Click. Study the Tax Group entry. You can then enter HST on the invoice and ACCPAC can automatically calculate HST at 15%. Click to continue. Same Tax Authority as GST.

19. Prepayment A deposit may be required for new customers whose credit has not yet been established with the company, for unusually large orders, or for special custom orders. In our example, Best Computer Ltd. is a new customer and they are making a large order of $10,000. CCSL has required a deposit of $2,500.Click. Assume that you have created a customer record for Best Computer Ltd. Study the A/R Receipt Entry for the prepayment.Click. The Prepayment Doc. No. is assigned by ACCPAC when you save the entry. Also notice that an invoice no. is entered in the Apply Prepayment To field. Click to continue.

20. Prepayment (continued) When the goods are ready to deliver, an invoice is prepared. Study the DOCUMENT page of the A/P Invoice Entry. Notice that it is not any different from what you have already seen before. Click the other tabs starting from TAXES. Click. Be sure that the printed invoice corresponds with the TOTAL page. Notice that the available discount is not accounted for on the invoice. It is only given when the customer pays within the estimated discount period. Click to continue. Use the HST Tax Group, just like the other tax groups you have used before. ACCPAC will calculate taxes automatically. Notice that there is discount available on this sale. Like the other invoice entries earlier, this page is blank.

21. Deposit Slips Each deposit at the bank should include one receipt batch only. This way, when bank reconciliation is done (discussed in Chapter 8), each deposit on the bank statement will match each deposit listed in Bank Services.Click. Study the various ways of printing a deposit slip.Click. Study a sample deposit slip which you can take to the bank with your deposits. Click to continue. To print a deposit slip: After entering the receipts in the A/R Receipt Entry window, click the Deposit button. Display the A/R Receipt Batch List window after entering the receipts batch and click the Deposit button. Use the Deposit Slips icon in the A/R Transaction Reports desktop window.

22. Recurring Charges If you invoice customers regularly for the same charges (e.g., maintenance), you can create a recurring charges record to instruct ACCPAC to generate invoices. You can then activate the record whenever the charges are due. This saves data entry time and helps avoid errors.Click. Study the settings required in the A/R setup related to this function.Click. Study the INVOICE page of a sample Recurring Charges Record. Click the other tabs starting from DETAIL. Click to continue. These fields are updated by ACCPAC whenever you create use the recurring charges record to generate an invoice. Usually the total amount of the contract or the yearly total. One of the Terms of Sale defined in the A/R Setup. Like in other entry screens, this page is blank. Make sure this box is checked.

23. Recurring Charges (continued) When the charges are due, you would create an A/R recurring batch from the A/R Periodic Processing desktop. Study the relevant window at the right. The invoices will be generated as soon as you click the PROCESS button. Click to continue. These options allow you to create more than one entry in the Recurring Charges Batch. Each entry will be printed on a separate invoice.

24. Processing Write-Offs If you have outstanding invoices that will likely not get paid due to customer bankruptcy or customers not willing to pay their accounts, you can write off transactions using the Create Write-Off Batch procedure. The process creates an adjustment batch. When posted, the write-off is recorded to the specified BAD DEBT EXPENSE account (see right). In our example, CCSL wrote off 2 cent residual on Home Publishing’s Invoice No. 57.Click. Study the A/R Create Write Off Batch window. When you click the PROCESS button, Click the PROCESS button now Click the PROCESS button now. The A/R Adjustment Entry will be automatically generated. You can then post the batch. Click to continue.

25. Generating an Interest Batch In the A/R setup, you defined two Interest Profiles (see right).Click. Every customer is assigned a Group Code that includes an Interest Profile code (see right). At period-end, you can instruct ACCPAC to calculate interest on outstanding accounts as specified in the Interest Profiles. The interest charges will be placed in an Interest Batch that you can post.Click. This is the Interest Profile charging Commercial customers 15% p.a. interest on accounts overdue 5 days or more. This is the Interest Profile for Institutional customers with NO interest charge on overdue accounts.

26. Generating an Interest Batch (continued) Study the A/R Create Interest Batch window for COMMER. When you click the PROCESS button, Click the PROCESS button now. …the Interest Batch will be generated (see Batch List at right) which you can then post. The next time you print customer statements, the interest charges posted from the Interest Batch will be added to the customer’s total owing. Click to continue.

27. Customer Activity ACCPAC maintains a Customer Activity record for each customer which can be used for inquiries, planning and decision-making. Study the ACTIVITY page for Wisco Engineering. Click other tabs starting from AGING. You can find more information on Transactions and Receipts by highlighting the item and clicking the OPEN and/or the DOCUMENT button. When finished, click to continue.

28. Printing Customer Statements Statements are issued as a reminder to customers of unpaid accounts. Customers also use them to reconcile their accounts with their vendors. You may print a statement for one, for a group, or for all customers. Print Statements must have been checked in the individual customer’s record (see right). Be sure to set the Print Destination to Printer.Click. Study the sample statement. Click to continue.

29. A/R Period-End Processing Print Month-End Reports Batch Status Report The Batch Status Report is very important and should be printed first, as it gives a summary of all the batches processed during the period. It indicates the status of the batches. Click and study the various types and possible status of A/R batches. Batches not posted should be investigated and either posted or deleted before printing other reports and moving to the next period. The Batch Status Report must be printed before any posted or deleted batches are purged. Click to continue.

30. A/P Period-End Processing (continued) Print Month-End Reports Study the description of the various reports that may be useful to you at period-end. Click to continue. Aged Trial Balance This report is sometimes referred to as the Schedule of Accounts Receivables. You may use the report to verify the accuracy of posted transactions prior to printing statements. You may also use it to aid in the collection of payments from customers. The Accounting Manager usually requires an Aged Trial Balance by Document Date for analysis. Customer Transactions Report This report lists selected transaction types for all customers or for selected customers for either a range of dates or for a fiscal period. Customer Statistics Report This report provides customer statistics that are accumulated on the Statistics and Activity pages of each customer record. G/L Transactions Report This report is not essential to A/R Period-End Processing, but provides record of the A/R subledger data before they are posted in G/L.

31. Clear A/R History At this point, obsolete data can be cleared from the customer records so that only relevant information is stored. Click and study the customer and A/R transactions records that may be cleared. Click to continue. Customers and A/R transactions that may be cleared at period-end Fully paid documents. Customer comments (notes attached to the customer by the user). Customer period statistics (total amount of invoices, receipts, discounts, credit and debit notes and adjustments for a customer in a period). Printed posting journals. Posted and deleted batches. Inactive customers.

32. Post A/R Subledger Batches in G/L Review the A/R Options that are relevant to G/L. Because you selected During Posting for Create G/L Transactions, ACCPAC automatically created A/R subledger batches in the G/L when batches are posted in A/R. The last step in period-end processing related to A/R is posting the A/P subledger batches in G/L. Backing Up A/P Data At period-end, an archival backup of A/R data should be made and kept for at least one full year. This is in addition to the regular daily and weekly backups prior to posting. Click to continue. Selecting this option instructs ACCPAC to automatically create A/R subledger batches in the G/L when batches are posted in A/P. Do Not Consolidate instructs ACCPAC to post transaction details to G/L instead of a consolidated summary. Selecting Document Number instructs ACCPAC to show the Invoice No. or Cheque No. in the Reference Filed in the G/L.

33. EXITMore… Go back to your text and proceed from where you have left off. Press ESC now, then click the EXIT button.