Faculty of Business and Creative Industries
PROCESS ACCOUNTS PAYABLE AND RECEIVABLE
BSBFIA303A
SECTION 1
LEARNER GUIDE – INTRODUCTION
The Need for Accounting
What is Accounting?
Accounting is the process of recording, classifying, interpreting, summarising and communicating
information. The records of the financial activities of a business are called financial records.
What is the difference between a bookkeeper and an accountant?
A bookkeeper prepares financial records by transferring information from source documents to
journals, posting this information to ledgers and preparing reports. An accountant summarises and
analyses these financial records.
Why is accounting needed?
Accounting is needed so as to provide interested parties with information on the profitability and
financial position of a business. Businesses are also required to keep accurate records that comply
with government laws and regulation.
The parties who are interested in the profitability and financial position of a business are: owners,
management, creditors, investors, potential investors, government, employees, trade unions and the
general public.
Processing information through the accounting system
The main elements of the accounting system are the source documents, the journals and the ledger.
These devices are used to collect and summarise financial data, which is then displayed in financial
reports.
Accounting terms used in a business
Account: is a means of recording all relevant data to a particular person or thing eg in the Cash at
Bank account would only be recorded the movement of money coming into and out of the business.
Aging Accounts: the process of determining the age of a debt or how long the debt has been owing.
Aging a statement tells the customer and your own accounting department how long various amounts
have been owing. This is especially important to the business as it can monitor customers who are
not paying their accounts promptly.
Assets: items of value, OWNED by the business, for USE within the business eg Cash at Bank,
Office Equipment., Office Furniture
Buying/Selling on Credit: the business will purchase/sell goods and services/assets without
paying/receiving cash at the time of the transaction. Instead, the amount will be paid to the
supplier/received from the customer within one month (30 days) of the date of the transaction.
Chart of Accounts: is a complete list of accounts in the general ledger. It is a list of account titles
classified and indexed according to the nature (type) of the account eg Proprietorship, Asset, Liability,
Expense or Revenue. (See page 8)
Credit: means to enter an amount in the credit column of the ledger card.
Cross Reference: when posting from the journal to the ledger card, it is necessary to record the
journal page number beside the ledger card entry and to cross reference ledger account number
beside the journal entry which has been posted.
Cycle Billing: staggering the preparation and sending of statements eg on a set date each month.
Customers’ records are divided into groups (alphabetical or geographical) eg A-F sent on the 1st day
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of each month, G-L sent on the 8th day of each month, M-R sent on the 15th day of each month and
S-Z sent on the 23rd day of each month.
Debit: means to enter an amount in the debit column of the ledger card.
Double-entry Accounting: is a system of recording transactions according to the accounting equation
for which every debit entry must be accompanied by a corresponding credit entry of equal value.
Drawings: withdrawals of cash and goods from a business by its owner.
Expenses: the costs and/or losses incurred in the day-to-day running of the business eg Purchases,
Wages, Advertising, Electricity, Bad Debts.
Folio Number: page number eg S1 means Sales Journal page 1.
General Ledger: contains details of all accounts relating to the business, except the trade debtors’
and trade creditors’ personal accounts. These accounts are represented in the general ledger by
control accounts of the same name.
Goods and Services Tax: It is a consumption or value added tax which will be applied at a flat rate of
10% on the sale of most goods and services. It came into effect on 1 July 2000. GST is added to the
selling price of goods and services as they pass through the business supply chain until they are
finally consumed. To avoid the tax cascading and multiplying through the sales process, each
registered business is given a rebate of the GST they paid to their supplier when they on sell the
goods.
Liabilities: items of value OWED by the business, eg Bank Overdraft, Mortgage.
Proprietorship: value of the owner’s investment in the business. It is also known as Capital, Owner’s
Equity or Net Worth of the business.
Purchases: trade goods bought for cash or on credit, with the intention of resale
Revenues: the earnings or gains made during day-to-day running of the business eg Sales, Rent
Receivable, Interest Receivable.
Sales: trade goods sold for cash or on credit.
Schedule of Creditors’ (Accounts Payable) Balances: the listing and totalling of outstanding balances
from the Creditors’ Ledger. This total should agree with the balance in the Creditors’ (Accounts
Payable) Control account in the General Ledger.
Schedule of Debtors’ (Accounts Receivable) Balances: the listing and totalling of outstanding
balances from the Debtors’ Ledger. This total should agree with the balance in the Debtors’
(Accounts Receivable) Control account in the General Ledger.
Settlement Discount: a monetary reduction or deduction applicable when the account is paid and
which is conditional upon the buyer paying for the goods within an agreed time. If payment is late the
discount will not be allowed.

Discount Allowed: allowance given by the business to trade debtors

Discount Received: allowance received by the business from trade creditors
Sundry Creditor: the supplier to whom the business owes money for the purchase of an
asset/services (non-trade goods/services) on credit.
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Sundry Debtor: the customer to whom the business has sold an asset (non-trade goods) on credit.
Trade Creditor: the supplier to whom the business owes money for trade goods bought on credit
(Supplier or Accounts Payable).
Creditors’ Ledger (Accounts Payable Ledger): contains all details of suppliers from whom the
business has purchased goods, services on credit.
Trade Debtor: the customer to whom the business has sold trade goods on credit (Customer or
Accounts Receivable).
Debtors’ Ledger (Accounts Receivable Ledger): contains all details of customers to whom the
business has sold goods, services on credit.
Trade Discount: a monetary reduction or deduction in the catalogue or listed price of goods given by
the seller to customer who will be using a product within their line of work eg Marathon Tyres could
give a Shell Garage a trade discount on tyres to be used in its line of work.
Accounting Equation
The Accounting Equation: is a formula used in double-entry accounting systems which shows the
relationship between proprietorship, assets and liabilities. Proprietorship (capital) is the difference
between the total value of assets and the total value of external liabilities.
There are three different forms of the Accounting Equation:
Assets
=
Proprietorship
Liabilities
=
Assets
Proprietorship
=
Assets
-
+
Liabilities
Proprietorship
Liabilities
The whole of the accounting process is based on the accounting equation.
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CHART OF ACCOUNTS
1
1.1
1.2
1.3
1.4
1.5
ASSET ACCOUNTS
4
REVENUE ACCOUNTS
Current Assets
Cash at Bank
Payroll Cheque Account
Accounts Receivable Control (Trade Debtors)
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Sales
(Sales Returns)
Discount Received
Interest Revenue
Rent Revenue
Commission Revenue
Freight and Insurance Collected
Dividends/Interest on Investments
6
EXPENSE ACCOUNTS
6.1
6.2
6.3
6.4
6.5
6.6
6.7
Purchases
(Purchases Returns)
Discount Allowed
Advertising
Bad Debts
Bank Charges
Electricity
6.8
6.9
6.10
6.11
6.12
6.13
6.14
6.15
6.16
6.17
6.18
6.19
General Expenses
Insurance
Interest Expense
Postage
Rent Expense
Repairs and Maintenance
Stationery/Office Supplies
Telephone
Travel Expenses
Wages and Salaries
Freight and Insurance Paid
Donations
6.20
Depreciation
6.21
6.22
6.23
Printing
Cleaning
Rates
Interest on Overdraft
Inventory
Sundry Debtor
1.10
1.11
Non-current Assets
Land
Buildings
1.12
1.13
1.14
Plant and Equipment
Shop Fittings (Fixtures & Fittings)
Motor Vehicles
1.14A
1.15
1.15A
1.16
1.16A
Accumulated Depreciation on Motor Vehicles
Office Equipment
Accumulated Depreciation on Office Equipment
Office Furniture
Accumulated Depreciation on Office Furniture
2
LIABILITY ACCOUNTS
2.1
2.2
2.3
2.4
2.5
2.6
Current Liabilities
Accounts Payable Control
Bank Overdraft
Group Taxation
Medical Insurance
Superannuation
Sundry Creditor (Trade Creditors)
2.10
2.11
GST Liability
GST Collected
(GST Outlaid [Paid])
2.15
2.16
Long-term Liabilities
Mortgage of an Asset
Bank Loans
6.24
3
PROPRIETORSHIP (OWNER’S EQUITY)
6.25
6.26
6.27
3.1
3.2
Capital
(Drawings)
6.28
6.29
Gas
6.30
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THE PRINCIPLE OF DOUBLE ENTRY
For every DEBIT entry recorded there must be a CREDIT entry recorded to exactly the same
value.
THE PROCEDURE FOR DOUBLE ENTRY
ASSETS
LIABILITIES
PROPRIETORSHIP
-
-
-
to increase
DR
to decrease
CR
to increase
CR
to decrease
DR
to increase
CR
to decrease
DR
DR Balance
CR Balance
CR Balance
EXPENSES
-
DR amounts
REVENUES
-
CR amounts
The above procedures are based on the ACCOUNTING EQUATION:
ASSETS = LIABILITIES + PROPRIETORSHIP (Owner’s Equity)
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THE NATURE OF TRANSACTIONS
In any business, a transaction—the exchange of money for money’s worth of goods or services—has
two sides. That is, there is always someone who gives value and someone who receives value. At
all times the transaction must be seen from the viewpoint of the business—is the business
buying or selling goods/services.
The accounting equation is the relationship of proprietorship (capital) to assets and liabilities based
on the concept of TOTAL DEBITS = TOTAL CREDITS. Proprietorship (capital, owner’s equity, net
worth) is the difference between the total value of the assets and the total value of external liabilities
(the debts incurred by the business, distinct from the owner’s investment which is considered to be
an internal liability).
There are three different simple mathematical forms of the accounting equation:
Proprietorship = Assets – Liabilities
(P = A – L) or (C = A – L)
or
Assets
= Proprietorship + Liabilities (A = P + L) or (A = C + L)
or
Liabilities
= Assets – Proprietorship
(L = A – P) or (L = A – C)
CALCULATING THE GST
The GST was introduced on 1 July 2000 and is levied at the rate of 10% on taxable supplies (see
page 3).
If you sell a taxable item and quote a price that is GST exclusive (original cost), it must be multiplied
by 10% to calculate the GST to be added to determine the final selling price.
If you sell a taxable item and quote a price that is GST inclusive, then the final selling price must be
divided by 11 to determine the GST component. Subtract the GST to find the original cost of the item.
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THE JOURNAL FRAMEWORK
All transactions are evidenced by some sort of written document. We call these documents source
documents.
The source document provides us with the necessary information to write up the journals (books of
original entry).
Only pertinent information is taken from the source documents for entry into the journals. Journals
have three main functions:
a
b
c
classifying
summarising
means of transfer
sorting documents of a like nature together,
consolidating relevant information, and
posting the information into a ledger. In the ledger we keep accounts.
An account is a means of recording all relevant data relating to a
particular person or thing. (See Chart of accounts for accounts listing.)
The journals in a typical retail business are summarised below.
Event
Source document
Record in Journal
Sale of trade goods
and assets on credit
Tax Invoice issued
(duplicate)
Sales
Return inwards of
trade goods and
allowances on credit
Adjustment Note
issued (duplicate)
Sales Returns and
Allowances
Receipt of money
(cash,
cheques,
credit card, eftpos)
(Tax)
Receipt
(duplicate)
cash
register listing, bank
statement
Cash Receipts
ALL
OTHER
TRANSACTIONS:
Opening Entry
Interest Receivable
Interest Payable
Bad Debts
Correction of errors
Reversal entries
Omission of entries
Purchase of Asset
VARIOUS:
Tax Invoices
Statements
Memos
GENERAL
Post to ledger cards
ACCOUNTS
RECEIVBLE
LEDGER
G
E
N
E
R
A
L
(DEBTORS OR
CUSTOMERS)
ACCOUNTS
PAYABLE
LEDGER
Sale of Asset
Purchase of trade
goods or assets on
credit
Tax
Invoice
received (original)
Purchases
Return outwards of
trade goods and
allowances on credit
Adjustment Note
received (original)
Purchases Returns
and Allowances
All cash payments
(cheque) made from
the business
Cheque butt
Cash Payments
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(CREDITORS
OR
SUPPLIERS)
L
E
D
G
E
R
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Using these Learner Guides
MYOB files have been created for you to process the supplier, customer and cash transactions for
each business.
The Learner Guide will explain how to process a type of transaction, followed by an example. You are
then required to finish processing the remaining transactions.
On completion of each exercise, you are required to check your work for accuracy. Once this has
been done, ask your facilitator to check this work and sign the completed column on your log sheet.
Do not print any hard copy reports unless requested to do so.
Competency tasks are clearly marked and must be submitted to your facilitator via email. You may be
asked to print selected reports as evidence of your competency.
If you want to complete exercises outside of class you can book computer time in the library.
Alternatively, a 30 day trial copy of MYOB can be downloaded from their website or a Student
edition CD (which is transaction limited for educational purposes only) purchased online or
from selected MYOB retailers.
This guide and its contents are subject to copyright under the laws of Australia and, through international treaties, other
countries. The copyright is owned by TAFE NSW, or in the case of some materials, third parties. You must not reproduce,
transmit (including broadcast), adapt or otherwise exercise the copyright in the whole or any part of this guide.except as
expressly permitted by TAFE NSW's prior written consent.
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GETTING STARTED WITH MYOB
Ask your facilitator for the following company files to be copied onto a USB:
ACCESSING THE PROGRAM
Double Click on the MYOB icon on the desktop or
Click on START – Programs
 MYOB AccountRight V19.6 ed –
 +MYOB AccountRight V19.6 ed +
In your exercises you will click on Open to open an existing file, Create to setup a new Company
file or Explore to tour the sample company.

Explore to tour the sample company, Clearwater

MYOB can have a password assigned for security, at this window click OK.
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
At the following screen select NO

Once MYOB is open Click on Setup, Company Information and key in your name after the
Company Name.

Click on Setup Preferences  Security  remove tick from ‘warn before recording
postdated transactions’.

Still in Setup, click on Purchases and tick ‘show Supplier Inv numbers in Supplier
Payments’

The Command Centre is the main screen for MYOB and all transactions are generated from
this area.
Title Bar and
Company Name
Module areas
Work area
Task Bar
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The Command Centre (Take a brief tour; click on the following headings)
The Top Menu Bar is used mainly for company setup but most areas of the program can be
accessed from here.
Accounts Command Centre
Accounts List (Chart of Accounts) is the area where you edit existing accounts, create new ones
delete unwanted, view account balances and set budgets.
Record Journal Entry gives access to the chart of accounts. Journal entries are linked to the chart
of accounts; you can transfer funds between accounts and perform special transactions such as
depreciation.
General Journal entries in MYOB are not linked to subsidiary ledgers (Accounts Payable and
Receivable) so transactions involving Trade Debtors/Creditors are best processed through Sales or
Purchases.
Transaction Journal allows viewing of transactions already completed. They are displayed in date
order and the original entry can be accessed and edited.
BASlink can be used to prepare BAS and lodge it directly with the ATO.
Banking Command Centre
Spend Money is generally used for cash accounting and recording payments of expenses for the
business. Purchases of Goods and Services are usually recorded in Purchases that links directly with
the Accounts Payable subsidiary ledger.
Receive Money is generally used for cash accounting and recording receipts. Sales of Goods and
Services are usually recorded through Sales that links directly with the Accounts Receivable
subsidiary ledger.
Prepare Bank Deposit is used to record grouped receipts for banking to keep MYOB’s record the
same as the Bank’s making reconciliation easier.
Reconcile Accounts is used to prepare the Bank Reconciliation; by comparing MYOB’s records with
the Bank Statement.
Prepare Electronic Payments records payments being made electronically and is often used for
Payroll.
Transaction Journal records receipts and payments. Although receipts can be edited, cheques may
have to be deleted and rewritten.
Bank Register lists details of all banking transactions
Sales Command Centre
Enter Sales is where Sales, Orders and Quotes are recorded to Customers on invoices. The layout
can vary according to the type of sale. This links to both General and Accounts Receivable Ledgers
and keeps the two in balance. To change the layout of an invoice, click on Layout at the bottom of the
screen. Paid Today feature allows for the recording of cash sales on invoices.
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Receive Payments records Account Customer Payments. Receipts can be grouped together for a
Bank Deposit on banking day or deposited directly to the bank.
Sales Register groups transactions according to Type. Returns and Credits can be applied to the
correct transaction from this window.
The Purchases Command Centre
Enter Purchases is used to record purchases, quotes and backorders from Suppliers. The invoice
layout varies according to the type of transaction. It is linked to the General and Accounts Payable
Ledgers and keeps the two in balance.
Pay Bill is used to record payment of accounts to Suppliers.
Prepare Electronic Payments allows for the recording of payments made over the Internet or
electronically.
Purchases Register allows viewing of all purchases and changing of their status from Quote to
Order or Bill (Invoice). Returns and Debits can be applied to the correct transaction.
Card File Command Centre
Details of Customers, Suppliers, Employees and Personal contacts are kept in the Card file.
Card List displays a list of all cards in the system. They can be grouped according to type.
Credit Limits are recorded on Cards and MYOB will warn if the transaction will exceed the limit – the
limit can be changed at any time.
The Task Bar
The To Do List is used to record Recurring Transactions and can give an alert when inventory items
are running low or discounts are about to expire.
Reports is used to generate reports. The Index to Reports will be displayed and the required report
selected and customised if necessary.
Find Transactions displays all transactions within a date range. The window can be customised to
display particular types of transactions within a given date range.
Analysis is an accounting tool that gives valuable information on the business.
Visual representation of the data file in the form of graphs from many of the reports can be projected
into this feature.
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Some tips for using MYOB
Adjusting the date
To advance the date, or go back to a previous one click on date currently in Date field and press plus
(+) or minus (-).
Using the calculator
A pop-up calculator can be activated to calculate an amount and automatically add it to a transaction.
To activate the calculator, press the +, -, *, /, or = key in an amount field.
The Chart of Accounts
The Chart of Accounts in MYOB is set up as follows:
Header Accounts – specify the title for a group of accounts (detail) that are similar in purpose
Detail Accounts – represent a particular type of transaction which can be used to record transactions
When a company file is created for the first time an initial chart of accounts is selected. This reflects
what the accounts most commonly used by this type of business. New accounts can be added
through the Accounts module.
Asset accounts start with 1Liability accounts start with 2Equity accounts start with 3Income accounts (relating to daily business) start with 4Cost of sales (purchases) accounts start with 5Expense accounts (relating to daily business) start with 6Other Income accounts (not directly related to daily business) start with 8Other Expense accounts (not directly related to daily business) start with 9-
Header account
Detail account
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Checking the current financial year
When completing class exercises it is important that the transactions are processed in the correct
financial year.
MYOB will automatically default to the date and financial year of your computer system. As the
exercises are set for a particular month, you need to make sure that the dates entered for
transactions are for the month given and reflect the relevant financial year.
To check the current financial year:


Setup (top tool bar)
Company information
Conversion month – beginning month for
computerised transactions i.e. no entries
can be made prior to this time
current financial year June 2013
i.e. transactions can only be entered
from conversion month (07/10) to
last month of financial year (06/13)
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Correcting errors
In a business, best practice principles have the security settings on MYOB for transactions with
accounting errors to be reversed, not deleted. This provides an audit trail.
For learning purposes, settings have been altered to allow transactions to be deleted if accounting
errors occur.
If amendments are required for data entry errors, transactions may be altered to reflect the correct
information.
The most common method of finding the details of transactions processed to-date is to use the
Transaction Journal – located at the Command Centre.
Once you have opened the transaction journal, you can click on the relevant tab or ALL to show all
transactions processed.
You need to make sure that you have the correct date range entered. Remember, MYOB will
automatically default to the current range as per your computer system.
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To make changes, click on the white arrow to the left of the transaction. The original date entry
screen will open and you can make the necessary adjustments.
Remember to record these before closing the screen. The original entry will now be replaced by the
amended one.
If a transaction is to be deleted follow the steps above to open the original entry. Once the screen
opens, go to the top tool bar and click on Edit. A range of choices will appear. Select Delete to erase
the original transaction.
You may also use Find Transactions from the Command Centre for information regarding
transactions. This is particularly useful for specific supplier or customer transaction information.
Use Card for access to supplier/customer ledger cards. Remember, to make sure that you have the
correct date range entered
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