Presentation on theme: "Premium 2011 PAYABLES Module Basics. Contents The PAYABLES Module 3 GAAP Related to Accounts Payable 4 The PAYABLES Module Window 5 The PAYABLES Subledger."— Presentation transcript:
Contents The PAYABLES Module 3 GAAP Related to Accounts Payable 4 The PAYABLES Module Window 5 The PAYABLES Subledger 6 Entering Purchase Transactions in the PAYABLES Module 9 Paid By Options 9 Purchase Journal Entries 11 Purchase of Merchandise 12 Merchandise vs. Goods NOT for Resale 13 Vendor Payment 14 Payments Options 16 Journalizing Invoice Payment 17 - Pre-Printed Cheques 18 Invoice Payment with Credit Card 19 Setting up Credit Card and Paying Credit Card Bill 20 Using Make Other Payment Option 21 Adjusting a Cheque 22 Journalizing Purchase Returns 23 Contents Slideshow 3A
The PAYABLES Module There are three main types of transactions that affect a company’s ACCOUNTS PAYABLE account. They are: Click. One thing that is very important to understand before you proceed: There is a difference between goods for resale (merchandise) and goods not for resale (expenses). Goods such as office equipment, office supplies, furniture, etc., that are purchased for use in the day-to-day operation of the business are considered assets. Consumables such as office supplies are entered as prepaid assets at the time of purchase. When assets (e.g., equipment), depreciate in value or consumed (e.g., office supplies), the depreciation value or the value consumed is entered as expenses. Likewise, payment for services such as advertising, rent, freight, etc. are entered as expenses. Click to continue. Purchases on account (credit). Payment for purchases on account. Prepayment (advanced payment) paid to a vendor for a future purchase. Types of transactions that affect ACCOUNTS PAYABLE
GAAP related to Accounts Payable: Review Review the GAAP principles and concepts related to Accounts Payable that you have already learned: Click. Click to continue. Comparability (Consistency) Principle In the preparation of financial statements, the same accounting concepts are applied in the same way in each accounting period. Representational Faithfulness Principle The term objectivity refers to unbiased measurements or valuations (“arm’s length transactions”) that could be independently verified. Cost Principle Items are recorded at their acquisition cost (historical cost). Monetary Unit Concept All business transactions are recorded in a common unit of measurement – the Canadian dollar. Matching Principle Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.
The PAYABLES Module Window Below is the home PAYABLES window. Click the numbered items in numerical order for information on the basic parts. Clicking the drop- down arrow for PURCHASE QUOTES will enable you to do the following tasks: Clicking the drop- down arrow for VENDORS will enable you to do the following tasks: Clicking the drop- down arrow for PURCHASE INVOICES will enable you to do the following tasks: Clicking the drop- down arrow for PURCHASE ORDERS will enable you to do the following tasks: Clicking the drop- down arrow for PAYMENTS will enable you to do the following tasks: Notice that you are allowed to select various types of payment. It is because Simply treats each of them differently. A vendor list appears on this pane. If you double-click on any of them, the corresponding Vendor Ledger will appear (see below). The Report Centre gives you easy access to PAYABLES reports:
The PAYABLES Ledger As in the RECEIVABLES module, you can set up a subledger for every vendor with whom your company deals with regularly. The first page of the vendor subledger is Address. Study the information that you can enter on the page. Click the OPTIONS tab. The Options page, among other things, contains the default account that you wish Simply to post purchases from the particular vendor, as well as the discount terms. As soon as you select the particular vendor the relevant information appear. Note that Calculate Discounts before Tax is checked. This instructs Simply to calculate discounts on the price before taxes if the company pays within the early payment terms. Click. Click the TAXES tab.
The PAYABLES Ledger (continued) As in the RECEIVABLES module, the TAXES page contains tax information for the vendor, which automatically appears on the Purchases Journal from which Simply base the calculation for taxes wherever they apply. HST rate of 13% is used in this text and reflected in the solutions. Click the STATISTICS tab. The Statistics page contains purchases and payments history for the particular vendor. It is automatically updated as you enter purchase and payment transactions with the vendor. Click the MEMO tab.
PAYABLES Ledger (continued) You can use the Memo page to keep information about the vendor and have the information show in the Daily Business Manager. Click the IMPORT/EXPORT tab. This page is similar to the Import/Export page in the Customers Ledger in the RECEIVABLES module. It refers to importing quotes and invoices from your vendors with your firm’s item numbers. Click the ADDITIONAL INFO tab. When entering transactions such as purchases, sales or paycheques, you can store pieces of information in the various field boxes in the Additional page. For example, you might want to store a voucher date or number on a sale. You can then select the field that you wish to display. The information appears in the Journal Entry reports. Click to continue.
Entering Purchase Transactions in the PAYABLES Module Similar to the RECEIVABLES module, you can create a Purchase Order (P.O.) in Simply. You would print it and send a copy to the vendor when you wish to get the goods delivered. You can convert the P.O. into an invoice once the goods are received. Click. The P.O. number and other P.O. details are carried over to the Purchase Invoice. Enter the vendor’s invoice number. Click. You can make changes on the invoice if necessary. In this example, the date was changed to a later date than the shipping date on the P.O. to reflect the actual date when the shipment was received. Click to continue.
Payment Method Options When entering an invoice, you need to specify your manner of payment in the Payment Method box. There is a total of four options, but only three are available when One-time vendor is selected. Click. Notice that all Paid By options are available when you select a vendor whose vendor subledger has been previously set up (vendor on file), Pay Later – used when you purchase on credit. Cash – used when cash is paid at the time of purchase (usually to a one-time vendor). Cheque - used when a company cheque is used for payment (usually payment for purchase on credit). Visa Credit – this is a credit card company previously set up as credit card that your company uses. (You will learn how to set up a credit card company later). Click to continue. Payment Method Options – One-time Vendor Payment Method Options – Vendor with Subledger
Purchase Journal Entries When goods you ordered are delivered, the vendor sends you an invoice. Click. On the back of the invoice, you would stamp the date when the invoice was received. Click. After inspecting the goods, somebody would approve the invoice, indicating the date and account number to which the shipment should be recorded. Click. Now there are three dates. Question: Which date should you use as the transaction date? Click to find the answer. Click to continue. Received 04/07/2016 back
Purchase Journal: Purchase of Merchandise You would enter a purchase transaction in a purchase invoice or convert an existing purchase order. Notice that 5040 PURCHASES is automatically entered in the Account column. How does Simply know which account to which purchases should be posted? Click. Whenever you create an invoice for a particular vendor, Simply automatically enters the specified expense account on the vendor’s subledger. You may, however, change this account on the invoice if necessary. Click to continue.
Purchase Journal Entries: Merchandise vs. Goods NOT for Resale Study the journal entry at the right. It pertains to a purchase of merchandise (for resale). Notice that it is charged to PURCHASES, as shown in the last slide. Click. The entry below pertains to a purchase of office supplies (not for resale). Remember, purchase of paper and printing supplies is entered as PREPAID OFFICE SUPPLIES, not to PURCHASES. In the example at bottom right, the actual cost of office supplies is $600.00 and HST (13% = $78). The Total = $678.00. Remember, however, that HST paid on purchases is recoverable. When it’s time to remit HST to the government, you would deduct HST paid on purchases from HST collected on sales and pay the difference, or get a refund if HST paid on purchases is greater than HST collected on sales. Click to continue. Purchase Journal Entry for Goods NOT for Resale (Example: Office Supplies) Debits Credits Prepaid Office Supplies 600.00 HST Paid on Purchases 78.00 Accounts Payable 678.00 Purchase Journal Entry for Goods for Resale (Merchandise) Debits Credits Purchases 300.00 HST Paid on Purchases 39.00 Accounts Payable 339.00
Vendor Payment If there are no applicable cash discounts, payments for merchandise (goods for resale) and non-merchandise (consumable goods or goods NOT for resale) are entered in the same manner. Click. When you entered the purchase of merchandise and the purchase of goods NOT for resale, you entered a credit to ACCOUNTS PAYABLE. Click. When you make payment for either transaction, you would simply debit ACCOUNTS PAYABLE and credit BANK ACCOUNT. However, you will find later in this slideshow that there are differences in the journal entries for various payment methods. Study the journal entries at the right. Click to continue. Purchase Journal Entry for Goods for Resale (Merchandise) Debits Credits Purchases 300.00 HST Paid on Purchases 39.00 Accounts Payable 339.00 Purchase Journal Entry for Goods NOT for Resale (Example: Office Supplies) Debits Credits Prepaid Office Supplies, etc. 600.00 HST Paid on Purchases 78.00 Accounts Payable 678.00 Payments Journal Entry for Goods NOT for Resale (Office Supplies) Payments Journal Entry for Goods for Resale (Merchandise) Debits Credits Accounts Payable 339.00 Bank Account 339.00 Debits Credits Accounts Payable 678.00 Bank Account 678.00
Vendor Payment (continued) All payments (for merchandise or goods/services NOT for resale) are entered in the Payments Journal. Like the Receipts Journal in the RECEIVABLES module, the Payments Journal looks like a cheque with a listing at the bottom of outstanding invoices. Click. To enter a payment, you would either select an option on the home PAYABLES window or open the Payments Journal and select the desired transaction type. Note that “Pay Expenses” on the home window correspond to “Make Other Payment” on the Payments Journal. You will learn more about these options in the next slides. Click to continue.
Vendor Payment (continued) PAID BY Options There are three PAID BY options: Cash, Cheque, or Credit Card. For this company, VISA CREDIT is used as the credit card name. As you select the PAID BY option, the header on the Payments Journal changes. Click. CASH – Notice that the company BANK account is automatically filled in the From field, indicating that the funds to be paid would be coming from that account. Notice what CASH is in the Source field. Click. CHEQUE – Notice that BANK ACCOUNT appears in the From field, and the next available cheque number is also automatically entered for the Cheque No. field. Click. Notice that there is no BANK account showing for the Credit Card option. Click to continue. CASH CHEQUE CREDIT CARD
Vendor Payment (continued) Journalizing Invoice Payment When you select the vendor from the To the Order of drop-down list, Simply will display all the outstanding invoices for the particular vendor. Click You can then select the invoice that you wish to pay by using the TAB key from Discount Available (see arrows) until the Payment Amount appears. You can pay more than one invoice at a time. In this example, only one invoice is paid. Click. Notice that the total amount of payment is automatically entered on the Amount field on the top portion. Click. The resulting Payments Journal Entry is the same whether you pay by Cash or by Cheque. Click to continue.
Vendor Payment (continued) Pre-printed Cheque At the right is a cheque printed in Simply on plain paper. It is necessary for a company to use pre-printed cheques not only because they look more professional, but also because to be valid, your cheque should include your MICR bank codes. Click to see a sample of a cheque printed by Simply on a pre-printed cheque form. Click to continue. Apr 07,2016 MICR bank codes Apr 07,2016
Vendor Payment (continued) Journalizing Invoice Payment with a Credit Card The procedure is the same when paying with a credit card. However, the resulting Payments Journal Entry is different from cash or cheque payment. Click and study the Payments Journal Entry for credit card payments. In effect, your ACCOUNTS PAYABLE is simply transferred from the vendor to the credit card company (VISA CREDIT CARD PAYABLE). In this example, however, shows an advantage by paying with the credit card. You are able to take advantage of the discount, which could be significant if the amount payable is large. Click to continue.
Balance Sheet Setting Up Credit Card and Paying the Credit Card Bill Credit cards Payable and Expense accounts are set up in the Settings option. Click. First, find out the Credit Card Payable balance on your Balance Sheet and credit card statement to see if there is any difference. To pay the credit card bill, Select Pay Credit Card Bills on the Home window. (see bottom right) Click. The current account balance automatically comes up in the Payments Journal as you select the credit card in the Vendor box. You can enter additional fees and interest according to the credit card statement (see notations on the Payments Journal), and enter the payment amount. Click. Study the relationship between the Settings, Payments Journal and the resulting Payments Journal Entry. Click to continue.
Vendor Payment: Using Make Other Payment Option Earlier you learned that entering vendor details in the Payments Journal of a one-time vendor is optional. You may record a payment to a one-time vendor without creating a vendor subledger by selecting Make Other Payment. Selecting either of the three other Transaction Type options will not allow you to select one-time vendor. You would also use the Make Other Payment option for a vendor on file if you wish to make a payment for something that does not have an invoice previously recorded in your company books; e.g., C.O.D. purchases, or unusual purchases or expenses. In this example, you are paying for setting up your website. Click and study the Payments Journal Entry. Click to continue.
Vendor Payment: Adjusting a Cheque In this example, after creating a cheque for the month’s rent, you realized that the rent has increased from $2,000 to $2,100.00 plus 13% HST as of April 1. To adjust the cheque, use LOOKUP to display it and click Adjust Other Payment (see arrow). Notice that the window heading indicates that you are adjusting the specific payment (2511). Click. Make the adjustments, then check the Payments Journal Entry before posting. Click To verify the adjustment, display the Cheque Log in the BANKING Module Report Centre (see top right). Also study what will appear on the All Journal Entries report when you select the CORRECTIONS option. Click to continue.
Original Invoice Journalizing Purchase Returns You would return goods to a vendor for the same reasons as your customers would return purchases to you (goods were damaged, not as ordered, etc.). When you return goods, you would normally send back the goods with a debit memo, since you are debiting (decreasing) your ACCOUNTS PAYABLE account. When the returned goods are received and verified by the vendor, the vendor usually sends the customer a credit memo indicating that the vendor has credited (decreased) the amount owed by you (the customer). Study the original invoice for the purchase of goods and the resulting Purchases Journal entry. On the next slide, you will learn how to record the purchase return. Click to continue.
Journalizing Purchase Returns (continued) To journalize the purchase return, enter the transaction as a negative vendor invoice. Study the purchase invoice at the right and the resulting Purchases Journal entry below. Notice that taxes apply only to the returned goods (not to the full amount of the original purchase invoice). Click. Review the journal entry that refers to the original purchase invoice at top right (also shown in the previous slide) and study how it relates to the purchase return journal entry (below). Click to continue. Purchase Return – Negative Invoice Purchase Return Journal Entry Purchase Journal Entry
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