The
PAYABLES Module
Beyond Basics
Slideshow 3B
Contents
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Filing HST Returns
3
Vendor Prepayment
6
Discount for Merchandise Purchases 8
Discount for Non-Merchandise Purchases 9
How the PAYABLES Module Affect Financial
Statements 11
PAYABLES Reports 12
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Vendor Aged Report 12
Pending Purchase Orders Report
Cheque Log 15
Cash Flow Projection
14
17
Slideshow 3B
Filing HST Returns
When you sell merchandise or services,
you would charge HST and record it as
HST CHARGED ON SALES, recorded as
a Liability, and therefore is a credit. HST
PAID ON PURCHASES is what you pay
when you purchase goods or services.
Study how these accounts are set up in
the Chart of Accounts and how Sage 50
presents them on the Balance Sheet. (see
right).
When you register for HST, the Canada
Revenue Agency assigns your business a
reporting period based on your business's
annual taxable supplies of goods and
services made in Canada. However,
depending on which annual taxable
supplies category your business falls into,
you may be able to choose an optional
HST reporting period instead of your
assigned one.
Filing HST returns can be done by mail,
through participating banks (unless you
are claiming a refund or filing a nil return),
or electronically through using HST
NETFILE, HST TELEFILE or Electronic
Data Interchange.
On the HST return, you declare the
amount of HST you collected from various
customers and deduct HST you paid on
purchases (also referred to as Input Tax
Credits or ITCs).
Click to continue.
Chart of Accounts
HST CHARGED ON SALES and
HST PAID ON PURCHASES are
entered as Liabilities A
(Accumulated) accounts. HST
OWING (REFUND) is usually
entered as an S (Subtotal) account.
Balance Sheet
Filing HST Returns
(continued)
HST COLLECTED ON SALES less
HST PAID ON PURCHASES
determine your HST net tax. This net
tax is either a positive amount (an
amount that you will have to pay the
federal government), or a negative
one (the amount of the refund the
federal government will send you).
Click.
To start journalizing HST payment,
you would click Pay Expenses on the
Payables home window. The
Payments Journal will appear, with
Make Other Payment transaction
type selected. This is correct, as there
is no invoice entered in the company
files for this type of transaction.
Click.
As you select Receiver General, the
account entered as the Expense
Account in the Payables Ledger
appears under Acct, which is this
case is HST CHARGED ON SALES.
Observe also the columns are
different from the other Payments
option.
Click to continue.
Filing HST Returns
(continued)
You would then enter the amounts for
HST CHARGED ON SALES and HST
PAID ON PURCHASES.
Click.
Notice that HST PAID ON
PURCHASES is entered with a minus
sign because it is a contra-liability
account (it decreases liability).
Click.
The TOTAL is the number entered in
the Amount of the cheque. This
amount should be equal to the HST
OWING (REFUND) amount on the
Balance Sheet.
Click.
Study the resulting Payments Journal
Entry.
Click to continue.
Vendor Prepayment
A vendor prepayment is an advance
payment on a commitment to purchase
from a vendor. Prepayment is usually
required for an unusually large order,
order for custom-made goods, or when
the company is dealing with a new
vendor. Similar to the RECEIVABLES
customer deposit, you would enter the
prepayment in a Purchase Order.
Click.
You would select the Payment Method
(Cheque in this case, see top arrow).
Notice that Prepay Ref. No. and
Prepayment Applied fields appear.
You would fill in the purchase order as
usual, enter the amount paid in the
Prepayment Applied field, and click
RECORD.
Click.
Study the Purchases Journal Entry.
Normally, there is no journal entry
generated by a Purchase Order, but
because there is payment involved in
this transaction, notice that the
prepayment is entered as a debit to
ACCOUNTS PAYABLE which normally
is recorded as a credit.
Click to continue.
Vendor Prepayment
(continued)
If you display the Vendor Aged
Detail report, notice that the
prepayment is entered in the vendor
Payables Ledger as a negative
amount. This is because the
prepayment is a decrease in the
company’s ACCOUNTS PAYABLE
ledger.
Click to continue.
Discount for Merchandise
Purchases
At this point, it is important to
distinguish between purchase
discount for merchandise (goods for
resale) and for non-merchandise
items (goods that you use or consume
to do business; e.g., office supplies,
office furniture, etc.).
In the last slideshow, you learned that
you would take a discount upon early
payment according to the terms of
payment. The Discount Available is
carried over in the Discount Taken
column when you tab to it.
Click.
Review the resulting journal entry.
Notice that Discount Taken is
recorded in the PURCHASE
DISCOUNTS account. Remember,
this is a transaction involving
merchandise for resale.
Click to continue.
Discount for NonMerchandise Purchases
Discount for purchases of goods not for
resale should NOT be recorded in
PURCHASE DISCOUNTS, as this will
cause the COST OF GOODS SOLD total
to be inaccurate. Instead, the discount
should be deducted from the cost of the
purchase (PREPAID OFFICE SUPPLIES
in this example).
Study the original invoice and purchase
journal entry at the right. According to the
terms of payment, there should be a
discount if it is paid within 10 days (on or
before April 16).
To journalize the payment with discount
requires two steps:
Step 1: Record the Discount.
Click.
At the time of payment, find out the
discount available in the Payments
Journal, but be careful not to post it
because if you do, it will post the discount
to PURCHASE DISCOUNTS, which is
wrong. In this example (see right), the
discount is $6.00.
Click to continue.
Do not post
Discount for NonMerchandise Purchases
Invoice No.– Enter the
original invoice number with
a suffix Di (for Discount)
(continued)
You would then create a Purchase Invoice
to record the discount. Click the circled
numbers on the invoice in numerical order
for an explanation of the invoice details.
Click and study the Purchase Journal Entry.
Step 2: Journalize the Payment
Detail Line– Enter the
discount amount as
negative. Notice that
there is no HST, and the
Acct is PREPAID
OFFICE EXPENSE.

Click.
When you journalize the payment, you
would include everything that refers to the
particular invoice. In this example, you
would process Invoices 4556 and 4556Di
without discounts taken.
The amount of the original invoice, less
the discount processed (no discounts
taken) appears as the AMOUNT and on
the cheque portion.
Click
Study the resulting Payments Journal
Entry. Observe that there is no
PURCHASE DISCOUNT recorded;
instead the discount reduces the amount
of goods purchased (e.g., Prepaid Office
Supplies) as well as ACCOUNTS
PAYABLE. Remember, this is for nonmerchandise purchase transactions.
Click to continue.
TERMS – The Terms boxes should
be blank.


How the PAYABLES
Module Affect Financial
Statements
Purchase on credit of
goods/services not for resale
increases Offices/Store
Expenses in the Income
Statement or increases assets
(prepaid assets; e.g., Prepaid
Office Supplies) in the Balance
Sheet. It also increases
ACCOUNTS PAYABLE, and HST
PAID ON PURCHASES (if any).
Click.
A payment decreases BANK
ACCOUNT and ACCOUNTS
PAYABLE in the Balance Sheet. If
paid within the discount period,
the amount paid will be reduced.
Click.
Discounts for merchandise for
sale will be reflected in the
PURCHASE DISCOUNTS
account in the Income Statement
(a decrease to Cost of Goods
Sold). Discounts for nonmerchandise will reduce the
asset or prepaid account.
These are just a few examples.
Click to continue.
PAYABLES Reports:
Vendor Aged Report
As in the RECEIVABLES module,
you can produce a Vendor Aged
report in either a summary or
detail format. Similarly, vendor
accounts are aged from the
session date based on transaction
date.
You may print an aged report for
one vendor, a group of vendors or
all vendors.
This type of report is very useful in
cash flow planning and vendor
inquiries.
Study the samples of summary and
detail Vendor Aged reports.
Click to continue.
Vendor Aged
SUMMARY
Report
Vendor Aged
DETAIL
Report
PAYABLES Reports:
Vendor Aged Report
(continued)
Balance
Sheet
Remember that at any time, the
Vendor Aged Summary Total
Outstanding ($6,114.67) must
equal the ACCOUNTS PAYABLE
control account in the Balance
Sheet.
Click to continue.
Vendor Aged
SUMMARY Report
PAYABLES Reports:
Pending Purchase Orders
Report
When you need to find the status of
your pending purchase orders, you
can display and/or print the
Pending Purchase Orders report..
You may display/print pending
purchase orders for a specific
vendor or for all vendors.
Click.
You may also find out if there is
any pending purchase orders for
any specific Inventory item.
Click to continue.
PAYABLES Reports:
Cheque Log
The Cheque Log report is very
important for the audit trail, bank
reconciliation and also for cash
control. Note that among other
things, the corresponding journal
entry. This ensures that every
cheque issued has been recorded.
It also includes the number of times
the cheque was printed.
The Cheque Log report should be
printed and filed along with the
other month-end reports.
Click to continue.
Cash Flow Projection
Report
The Cash Flow Projection report
shows how the bank account is
expected to change by anticipated
payments to outstanding vendor
accounts, and expected customer
payments (receipts) to be received
within a specified number of days.
The default is showing the cash
flow within 30 days. You can
change this by selecting Modify
Report Options when the default
report displays.
The detail report shows one line for
each transaction affecting the bank
account balance.
Study the options available and the
sample SUMMARY report at the
right.
Click to continue.
More…
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