Accounts Payable Bookkeeping
Jeff Steele, LDO,
CPOT, ABOC
Spokane Community
College
Objectives
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Describe accounts payable bookkeeping
Describe steps involved for bill paying and
maintaining expense documentation
Differentiate between gross pay and net pay
Identify payroll taxes which are deducted
from an employee’s earnings and those
which the employer must pay
Demonstrate reconciling a bank statement
Overview
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Accounts payable bookkeeping is the
management, verification, and prompt
payment of the practice expenses for
supplies, payroll, rent and utilities
These expenses represent overhead, or the
cost of doing business
Preparing Bills
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All bills awaiting payment should be stored in
an accounts payable folder or file, including
packing slips, invoices and statements
Bills offering a discount for prompt payments
should be paid at once, others should be set
up for a predetermined time of the month
(often the 10th and 25th)
Preparing Bills, Cont.
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Remove all papers from the accounts payable folder
and organize them by vendor
If a statement covers several invoices received
during the month, check each invoice against its
listing on the statement
When the invoices and their covering statement
have been verified, staple the invoices to the back of
the statement
The doctor may want to review these bills before you
write the checks
Expense Documentation
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Once a bill or statement has been paid, it is
marked with the date and check number,
then re-filed by category
Expenses are summarized by categories to
provide important management data (utilities,
venders, payroll, maintenance/cleaning, etc.)
Depreciation Schedule
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Supplies and minor pieces of equipment which are
used up fairly quickly are known as consumables,
and are handled as practice expenses
Major purchases, such as computers and testing
equipment, must be written-off over a period of time.
This process if called depreciation and it represents
the value that is lost through wear and tear
The practice accountant usually determines and
maintains the depreciation schedule
Annual Expense Summary
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After the accuracy of the entries have been
verified, totals of earnings and costs are
carried forth to the annual report
Payroll Taxes and Records
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Federal regulations require than an employer
make certain deductions from an employee’s
pay, and that the employer also pay certain
payroll taxes
In many cases, state and/or local taxes must
also be paid
The person in charge of payroll must be
familiar with all applicable taxes and follow
the instructions carefully
Government Reports
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Federal and state governments require an
employer to deposit all taxes withheld on a
regular basis
All govt. forms must be filled out exactly and
neatly and must be filed on time, as late
penalties may apply
A copy of the report should remain with the
company records for a period of at least 5
years after payment has been made
Payroll Records
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The government requires employers to keep records
regarding the payroll, so it should be accurate and
up-to-date at all times
A separate payroll sheet should be maintained for
each employee:
Name
Address
Social Security Number
Number of exemptions claimed
Gross vs. Net Pay
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Gross pay= total amount earned
Net pay= amount received after deductions
and taxes have been taken out of the total
amount earned
Deductions + Net pay = Gross pay
Payroll Deductions
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All employees must pay federal income tax and file a return
A portion of this tax is deducted from each paycheck
Income tax is strictly an employee tax (employer does not
contribute) and the amount withheld depends upon the amount
of exemptions claimed
Each employee must complete a Withholding Exemption
Certification (W-4) authorizing an employer to deduct tax and at
which amount
Wage and tax statements (W-2) show total earnings and taxes
withheld for the calendar year and must be given to employees
no later than January 31 of the following year
Social Security
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Under the Federal Insurance Contributions
Act (FICA), aka social security, the employer
is required to deduct a certain percentage of
the employee’s gross pay
The employer is also required to make
matching contributions
To assure accuracy, any name changes must
be reported to the Social Security
Administration
Federal and State Unemployment Tax
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The employer is required to make
contributions to state and federal funds to
cover the cost of unemployment benefits
paid out within the state
This is strictly an employer tax and may not
be deducted form an employee’s pay
Worker’s Compensation
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Under state law, the employer is also
required to contribute to worker’s
compensation to cover the medical expenses
of employees who are injured on the job
Also an employer tax
Petty Cash Fund
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A small petty cash fund may be used to pay
minor bills
Any time petty cash is used, a receipt or
voucher for the exact amount should be
included, so all monies can be properly
accounted for
Usually replenished about once/month
Check Writing
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In order to make fraudulent alteration difficult, checks must be
written properly:
Entries accurate and complete
Use ink or a check writer
Date the check (pre-dating a check is illegal and post-dating
should only be allowed with approval)
Address the check properly
State the amount clearly
Fill in all spaces
Authorized signatures only
Void checks in which a mistake is made and start over
Check the bank balance, to ensure accuracy
Reconciling a Bank Statement
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It is important that the bank statement, and your
check register records, be reconciled shortly after
receipt of the statement
You’ll need:
The check register
Deposit records for the period
The bank statement
Accompanying cancelled checks and debit memos
(debits can include the banks service charge)
Steps to Reconciling a Bank Statement
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Verify debits- compare each cancelled check or deduction
with each charge
Verify deposits
Verify cancelled checks- be sure to exclude the outstanding
checks (those which have not yet been cashed or included in
the statement)
Balance the register- through the last cancelled check or to
the current date
Perform calculations- repeat until all monies are accounted for
Make necessary adjustments- enter all service charge and
debits into the final tally, as well as account for any interest
that may have been earned on the account
Account Does Not Balance
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Here are some areas to explore:
Were all checks properly entered on the register?
Was the amount of each check entered accurately?
Are the amounts of your deposits the same as
those on the bank statement?
Are all outstanding checks accounted for?
Have you added interest earned?
Have you subtracted any debits/service charges?
Are all calculations correct?