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Accounts Payable Overview
The Accounts Payable (AP) system uses a series of sections, including an A/P Entry section, a Cash Disbursements section, an End-of-Month (EOM) section, and an AP Reports section. Within these sections are options for the programs contained in the A/P system.
This reference provides step-by-step instructions for processing AP information. The instructions are sequenced to coincide with the logical flow of an AP system. Also included are illustrations of the screens showing sample entries.
Vendors and Suppliers: What's the Difference?
Design of Accounts Payable System
Vendors and Suppliers: What’s the Difference?
The A/P system uses the terms, suppliers, vendors, and miscellaneous vendors to represent different types of vendors. In the A/P system, vendors, suppliers, and miscellaneous vendors differ as follows:
Suppliers provide inventory linked to a purchasing module.
Vendors provide non-inventory products and services, such as utilities and freight.
Miscellaneous vendors are non-repeat vendors.
Suppliers are accessible in the Purchase Order and Invoicing applications in the A/P system, but vendors are not.
If you send system-generated purchase orders to a supplier or vendor, create a Supplier File.
If you do not send system-generated purchase orders to a vendor or supplier, create a Vendor File.
Because AP functions are available to Supplier and Vendor Files, you do not need to create individual Supplier and Vendor Files.
Vendors are referenced with the V prefix plus an assigned six-digit vendor number.
Suppliers are referenced with the S prefix plus an assigned three-character supplier number.
Miscellaneous vendors are referenced with the M prefix.
Design of Accounts Payable System
The AP system functions in much the same way as a manual accounting ledger does.
Accounts and vendors have their own pages.
The ledger stores open transactions, also known as open items. For example, an unpaid bill appears on an accounts AP ledger.
When the bill is paid, the open amount becomes 0.00 and is removed from the ledger. The following table shows a simplified view of the life of an item on the AP ledger.
Date |
Action |
Debit |
Credit |
Balance |
May 1, 2001 |
A bill for $2,500.00 is entered on the ledger. |
$0.00 |
$2,500.00 |
$2,500.00 |
May 15, 2001 |
Partial payment of $1,000.00 is made. |
$1,000.00 |
$2,500.00 |
$1,500.00 |
May 22, 2001 |
The balance of $1,500.00 is paid. |
$2,500.00 |
$2,500.00 |
$0.00 |
June 1, 2001 |
The item no longer appears on the A/P ledger. |
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Any invoices paid in full appear on A/P Ledger until the month-end close.
All invoices with a 0.00 open balance are removed from the ledger. The A/P history still keeps these transactions, for auditing purposes, for the number of months specified in the system settings.
The end-of-month close-out program removes items with a 0.00 open balance. So, zero balance items remain until the following end of month close-out.
The two sides of the A/P ledger are labeled debit and credit to follow standard accounting conventions. When viewing these labels remember:
— Debit = money paid
— Credit = money owed
You can divide the AP ledger into debits and credits, or you can organize the ledger by source of transaction. The two sources of transactions are payables and cash disbursements. The system divides each of these groups by transaction codes, which can be assigned automatically or by the operator. Each code represents a specific type of payable or cash disbursement, such as vendor invoice, vendor credit memo, payment to vendor, and check reversal. Transaction codes are important because they initiate certain automatic program functions unique to a given code. For example, transaction code 11, which stands for credit memo from vendor, causes the system to check for negative credit invoice amounts.
Payables consist of bills and bill adjustments. Cash disbursements consist of payments and payment adjustments.
Note: Both payables and cash disbursements can be debits or credits.
The Accounts Payable Menu, menu option AP, includes options for the entire AP system.
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The Accounts Payable Menu is divided into the following areas (press the Page Down key to access more options).
Entry & Inquiry - This section contains all of the options for posting, editing, adjusting, updating, transferring, and viewing A/P transactions. You will post invoices from vendors and manual checks from this menu.
Note: For more information on the options contained in this section, refer to Posting A/P Transactions.
— Writing checks, which is initiated automatically by user-defined parameters or on a bill-by-bill basis.
— Analyzing cash requirements by any, or a combination of, company, vendor, due date, invoice date, voucher date, bank account, invoice number, or voucher number.
— Reconciling checks.
Note: The options on this menu are described in Processing Cash Disbursements.
A/P Demand Reports Menu - This area shows listings and reports used by the A/P system. These options are described in Accounts Payable Reports.
A/P End-of-Period Menu - This section includes functions for closing A/P at the end of every month. These functions are described in End of Period Close.
