Accounting Fundamentals: Accounts Payable

What does a PO typically include?

PO Number, date prepared, company name, vendor name, and contact information for business contact

A vendor file maintenance tip -

Use vendor invoices instead of vendor statements to prevent overpaying

A Vendor is also known as...

a supplier

Accounts Payable

accounting entries representing the money a company owes to creditors for items purchased on credit

In the accounts payable process, the invoice is approved before or after payment is made

before

Purchase on Account

business (or person) which receives the good or service and promises to pay at a later date; also referred to as "purchasing on credit"

The three-way match involves making sure these documents are in agreement-

company purchase order, company receiving report and vendor invoice

Accounts Payable increases when a company buys a good or service on-

credit

A Vendor Invoice includes:

description of the company order, items the company received, cost of each item, total cost of the order and the payment terms.

Vendor File

document or file which provides information about company vendors

Vendor Invoice

document provided to companies when they buy items on account

Purchase Order

document which authorizes a buyer to receive goods/services from a seller

Maintaining a a vendor file prevents:

late product shipments, late/duplicate payments and wasted time

Vendor Statement

lists all amounts owed from previous invoices

Vendor

person or business which provides goods and services to a company

The accounts payable process should include internal controls in order to-

prevent paying a fraudulent invoice, paying an inaccurate invoice, paying a vendor invoice multiple times, and be sure all vendor invoices are recorded.

Credit Terms

provides information about when an invoice is due

Schedule of Accounts Payable

report which lists all amounts which are owed by a business; further ensures which accounts payable entries are properly recorded

Receiving Report

used to indicate the goods listed on the purchase order which were actually received

Accounts payable Subsidiary Ledger

used to track accounts payable transactions in more detail

A vendor file includes:

vendor invoices, receiving reports and vendor statements.