1. Slideshow 6A Processing Customer Transactions

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 9 Processing Adjustments10 Processing Receipts from Customers 12 Out-of-Province Sales14 Prepayment15 Applying Prepayment to an Invoice16 Deposit Slips17 Recurring Charges 18 Processing Write-Offs 20 Generating an Interest Batch 21 Customer Activity 22 Printing Customer Statements 23 A/R Period-End Processing 24 Clear A/R History 26 Post A/R Subledger Batches in G/L 27

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 ($64.00) and parts($33.00).Click. Study the DOCUMENT page of the A/R Invoice Entry. 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. SALES SPLIT is blank, so skip it. Click to continue. Notice that Due Date and Discount Date are shown.

9. 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. SALES SPLIT is blank, so skip it. 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).

10. 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). Study the memo and the invoice entry below to which it refers. Click to see the adjustment entry to make the correction. Click to continue. Original invoice entry Adjustment entry

11. 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. 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. Original Entry as posted in G/L Adjustment Entry as posted in G/L

12. Processing Receipts from Customers COLLEGIATE 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 Payment types accepted by COLLEGIATE. You would normally enter all payment received regardless of payment 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.

13. 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 Receipt Unapplied amount is zero; otherwise, it will result in an ERROR batch. Click to continue. Back of cheque

14. 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 13%. First, you need to add the information for HST in Tax Services which you learned in Chapter 2. 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 13%. Click to continue.

15. 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. COLLEGIATE has required a deposit of $2,500 (study the invoice at top right). You would have created a customer record for Best Computers before producing the invoice.Click. Study the A/R Receipt Entry for the prepayment. Prepayment is selected as Document Type. The prepayment Document Number. is assigned by ACCPAC when you save the entry. Also notice that the invoice no. is entered in the Apply Prepayment To field. Click to continue.

16. Applying Prepayment to an Invoice Notice that when the prepayment was received, an entry was made on the Receipt Entry window. When the goods are ready to deliver, an invoice entry is made and the prepayment is applied. Study the DOCUMENT page of the A/R Invoice Entry. Notice that it is not any different from what you have already seen before. 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 the other tabs starting from TAXES. SALES SPLIT is blank so skip it. 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.

17. Deposit Slips Each deposit at the bank should include one receipt batch only. This way, when bank reconciliation is done (discussed in Chapter 7), 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.

18. 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 for A/R OPTIONS required related to this function, and the desktop where you would access the CREATE RECURRING CHARGE BATCH icon.Click. Study the INVOICE page of a sample Recurring Charges Invoice. You can process this invoice,. Click to continue. Schedule Code set up in Scheduling (see Chapter 2) Yearly maximum

19. 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 desktop at the right.Click You would specify recurring charges that you wish to generate. You can select more than one Recurring Charge Code, and the recurring charge invoice(s) will be created as separate entries in one batch when you click PROCESS.Click. The invoices will be generated as soon as you click the PROCESS button.Click. You can view the resulting Recurring Charges Invoice(s) in the A/R Invoice Batch List. Study the DOCUMENT page of the resulting invoice. Click the tabs from left to right. Skip SALES SPLIT.

20. 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). Study the relevant desktop.Click. Study the A/R Create Write Off Batch window where you would specify what you wish to write off. When you click the PROCESS button, Click the PROCESS button now Click the PROCESS button now. …a message appears indicating the Adjustment Batch No. generated. You can view the A/R Adjustment Entry on the A/R Adjustment Batch List. You can then post the batch. Click to continue.

21. 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).Click. At period-end, you can instruct ACCPAC to calculate interest on outstanding accounts by using the Create Interest Batch icon on the A/R Period Processing desktop (see right). The interest charges will be generated as specified in the Interest Profiles The chargeable interest amounts are placed in an Interest Batch that you can view on the A/R Invoice Batch List and 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. This is the Interest Profile for Institutional customers with NO interest charge on overdue accounts. This is the Interest Profile charging Commercial customers 15% p.a. interest on accounts overdue 5 days or more.

22. 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.

23. 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). Study the SELECT page. Click the CRITERIA page. Click again. Study the sample statement. Click to continue.

24. 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.

25. 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.

26. 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.

27. 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/R 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/R. Do Not Consolidate instructs ACCPAC to post transaction details to G/L instead of a consolidated summary. This options instructs ACCPAC to create a new batch for each A/R subledger batch posted.

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