The
PAYABLES Module
Basics
Slideshow 3A
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Contents
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Contents
Transactions in the PAYABLES Module
GAAP Related to Accounts Payable 4
The PAYABLES Module Window 5
The Vendor PAYABLES Ledger
6
Purchase Orders 10
Payment Method Options 11
How the PAYABLES Module Work 12
Purchase Journal 13
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Purchase of Merchandise
13
Purchase of Non-Merchandise Items 14
Purchase of Services 15
Transaction Date for the Purchase 16
Vendor Payment
•
17
Paid By Options 19
Journalizing Invoice Payment 20
- Pre-Printed Cheques
21
Invoice Payment with Credit Card 22
Setting up Credit Card and Paying Credit Card Bill
Using Make Other Payment Option 24
Adjusting a Cheque 25
Journalizing Purchase Returns
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3
23
26
Return of Merchandise
27
Return of Non-Merchandise Items
28
Slideshow 3A
Transactions in the PAYABLES
Module
There are three main types of
transactions that affect a company’s
ACCOUNTS PAYABLE account. They
are:
Click.
One thing that is very important to
understand before you proceed: There
is a difference between goods for
resale (merchandise) and goods not
for resale (expenses).
Goods such as office equipment, office
supplies, furniture, etc., that are
purchased for use in the day-to-day
operation of the business are
considered assets. Consumables
such as office supplies are entered as
prepaid assets at the time of
purchase.
When assets (e.g., equipment),
depreciate in value or consumed (e.g.,
office supplies), the depreciation value
or the value consumed is entered as
expenses. Likewise, payment for
services such as advertising, rent,
freight, etc. are entered as expenses.
Click to continue.
Types of transactions that affect
ACCOUNTS PAYABLE
•
Purchases on account (credit).
•
Payment for purchases on
account.
•
Prepayment (advanced payment)
paid to a vendor for a future
purchase.
GAAP related to Accounts
Payable: Review
Review the GAAP principles and
concepts related to Accounts
Payable that you have already
learned:
Click.
Click to continue.
Matching Principle
Revenue from business activities and expenses associated with
earning that revenue are recorded in the same accounting period.
Comparability (Consistency) Principle
In the preparation of financial statements, the same accounting
concepts are applied in the same way in each accounting period.
Representational Faithfulness Principle
The term objectivity refers to unbiased measurements or valuations
(“arm’s length transactions”) that could be independently verified.
Cost Principle
Items are recorded at their acquisition cost (historical
cost).
Monetary Unit Concept
All business transactions are recorded in a common unit of
measurement – the Canadian dollar.
The PAYABLES Module Window
Below is the home PAYABLES window. Click the numbered items in numerical order for information on the basic parts.
Click to continue.
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Clicking the dropdown arrow for
PURCHASE
QUOTES will
enable you to do
the following tasks:
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Clicking the dropdown arrow for
PURCHASE
ORDERS will
enable you to do
the following tasks:
Clicking the dropdown arrow for
VENDORS will
enable you to do
the following tasks:
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
Clicking the dropdown arrow for
PURCHASE
INVOICES will
enable you to do
the following tasks:
Clicking the dropThe Report
Centre gives you easy access to PAYABLES reports:
down
arrow for
A vendor list appears on this pane. If you double-click on any of them, the
PAYMENTS will
corresponding Vendor Ledger will appear (see below).
enable you to do
the following tasks:
Notice that you are
allowed to select
various types of
payment. It is
because Simply
treats each of them
differently.
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The Vendor Payables
Ledger
In the PAYABLES module, you can
set up a subledger for every vendor,
referred to as Payables Ledger.
The first page of the vendor
subledger is Address. Study the
information that you can enter on
the page.
Click the OPTIONS tab.
The Options page, among other
things, contains the default account
for purchases from the particular
vendor, as well as the discount
terms. As soon as you select the
particular vendor the relevant
information appear.
Note that Calculate Discounts
before Tax is checked. This
instructs Sage 50 Accounting to
calculate discounts on the price
before taxes if the company pays
within the early payment terms.
Click the TAXES tab.
The PAYABLES Ledger
(continued)
The TAXES page contains tax
information for the vendor, which
automatically appears on the
Purchases Journal from which Sage
50 Accounting base the calculation
for taxes wherever they apply. HST
rate of 13% is used in this text.
Click the Direct Deposit tab.
The direct deposit feature allows
you to pay bills electronically from
your bank account. If you also use
Sage 50 Accounting to manage your
payroll, you can deposit
paycheques directly to your
employees' bank accounts.
Sage 50 Accounting also allows you
to accept customer payments
directly to your bank account.
Click the STATISTICS tab.
The PAYABLES
Ledger(continued)
The Statistics page contains purchases
and payments history for the particular
vendor. It is automatically updated as you
enter purchase and payment transactions
with the vendor
Click the MEMO tab.
You can use the Memo page to
keep information about the vendor
and have the information show in
the Daily Business Manager.
Click the IMPORT/EXPORT tab.
This page is similar to the
Import/Export page in the
Customers Ledger in the
RECEIVABLES module. It refers to
importing quotes and invoices from
your vendors with your firm’s item
numbers.
Click the Additional Info tab.
PAYABLES Ledger
(continued)
When entering transactions such
as purchases, sales or
paycheques, you can store pieces
of information in the various field
boxes in the Additional page. For
example, you might want to store a
voucher date or number on a sale.
You can then select the field that
you wish to display by clicking the
appropriate box on the Additional
Info page (see red arrow at right).
The information that you select
appears in the Journal Entry
reports.
Click to continue.
Purchase Orders
In the PAYABLES module, you can:
• enter a Purchase Quote;
• convert it into a Purchase Order
(PO); then
• convert the PO into a purchase
invoice.
POs, like sales orders, are simply
recorded, and do not generate
journal entries.
Click.
Observe what information is copied
from the PO to a purchase invoice.
It is uncommon that a company
would enter purchase quotes in the
accounting system. They are usually
filed for future reference. It is
important, however, to enter
purchase orders (POs) in the
system, as it is good business
practice to check outstanding POs to
ensure that you have enough stock
of inventory for sale.
Click to see the Pending Orders reports
that are available (see red bracket at
right).
Click to continue.
Quantity ordered is carried over
to the invoice but could be
changed if necessary.
Payment Method Options
When entering an invoice, you need to
specify your manner of payment in the
Payment Method box. There is a total of
five options, but only three are available
when One-time vendor is selected.
Payment Method Options – One-time Vendor
Notice that all Paid By options are
available when you select a vendor whose
vendor subledger has been previously set
up (vendor on file),
• Pay Later – select when you purchase
on credit.
• Cash – select when cash is paid at the
time of purchase (usually to a one-time
vendor).
• Cheque - used when a company cheque
is used for payment (usually payment for
purchase on credit).
• Direct Deposit - The direct deposit
feature allows you to pay bills electronically
from your bank account.
• Visa Credit – this is a credit card
company previously set up as credit card
that your company uses. (You will learn
how to set up a credit card company later).
Click to continue.
Payment Method Options – Vendor with Subledger
How the PAYABLES Module
Works
When Pay Later is selected for
Payment Method, ACCOUNTS
PAYABLE is automatically credited
and the account under the Account
column on the invoice is debited.
Click.
When Cash, Cheque, or Direct
Deposit is selected for Payment
Method, BANK CHEQUING
ACCOUNT is automatically credited.
Click.
Notice that unlike in the
RECEIVABLES Module, no credit
charges are made when Visa Credit
is selected for Payment Method.
VISA CARD PAYABLE is
automatically credited.
Click to continue.
Purchase Journal:
Purchase of Merchandise
Remember that merchandise are
goods for resale (Inventory). You
would enter a purchase of
merchandise transaction in a
purchase invoice or convert an
existing purchase order. Notice
that the purchase is posted to the
TOYS AND PARTS INVENTORY
account (or equivalent).
Click.
ACCOUNTS PAYABLE is
automatically credited because the
Payment Method is Pay Later (on
credit). If it were a cash purchase,
BANK ACCOUNT will be credited.
Click.
To give you an idea of where the
accounts fall under in the Balance
Sheet, TOYS AND PARTS
INVENTORY is an asset;
ACCOUNTS PAYABLE is a
liability.
Click to continue.
Purchase Journal:
Purchase of NonMerchandise Items
Non-merchandise items are
purchases that are not for resale,
such as supplies, subscriptions,
office equipment, and the like.
This type of purchase is usually an
asset, but it is entered in the
expense account box on the
Options page of the Vendor
Payables Ledger so the specified
account automatically appears
when the particular vendor is
selected on the Purchase Journal.
Click.
Study the resulting purchase
journal entries.
Remember that PREPAID OFFICE
SUPPLIES and STORE
EQUIPMENT are assets;
ACCOUNTS PAYABLE is a
liability.
Click to continue.
Purchase Journal
Purchase of Services
Purchase of services such as transport
services, utilities, janitorial, security, etc.
are entered as expense.
Click.
You may enter the expense account on
the Options page of the vendor Payables
Ledger so it will automatically appear on
the Purchase Invoice for the particular
vendor.
Click.
Study the Purchases Journal Entry for the
invoice.
Click to continue.
Transaction Date for the
Purchase
When goods you ordered are
delivered, the vendor sends you an
invoice.
Click.
On the back of the invoice, you
would stamp the date when the
invoice was received.
Click.
After inspecting the goods,
somebody would approve the
invoice, indicating the date and
account number to which the
shipment should be recorded.
Click.
Now there are three dates.
Question: Which date should you
use as the transaction date?
Click to find the answer.
Click to continue.
back
Received
04/07/2016
Vendor Payment
If there are no applicable cash
discounts, payments for
merchandise (goods for resale)
and non-merchandise (consumable
goods or goods NOT for resale)
are entered in the same manner.
Purchase Journal Entry for Goods for Resale
(Merchandise)
Debits
Credits
Toy Parts and Inventory
HST Paid on Purchases
Accounts Payable
300.00
39.00
339.00
Click.
When you entered the purchase of
merchandise and the purchase of
goods NOT for resale, you entered
a credit to ACCOUNTS PAYABLE.
Click.
When you make payment for either
transaction, you would simply debit
ACCOUNTS PAYABLE and credit
BANK ACCOUNT. However, you
will find later in this slideshow that
there are differences in the journal
entries for various payment
methods.
Study the journal entries at the
right.
Click to continue.
Payments Journal Entry for Goods for
Resale (Merchandise)
Debits
Accounts Payable
Bank Account
Credits
339.00
339.00
Purchase Journal Entry for Goods NOT for Resale
Debits
Credits
(Example: Office Equipment)
Office Equipment
HST Paid on Purchases
Accounts Payable
600.00
78.00
678.00
Payments Journal Entry for Goods NOT for Resale
(Office Equipment)
Debits
Credits
Accounts Payable
Bank Account
678.00
678.00
Vendor Payment
(continued)
All payments (for merchandise or
goods/services NOT for resale) are
entered in the Payments Journal.
Like the Receipts Journal in the
RECEIVABLES module, the
Payments Journal looks like a cheque
with a listing at the bottom of
outstanding invoices.
Click.
To enter a payment, you would either
select an option on the home
PAYABLES window or open the
Payments Journal and select the
desired transaction type. Note that
“Pay Expenses” on the home window
correspond to “Make Other Payment”
on the Payments Journal. You will
learn more about these options in the
next slides.
Click to continue.
Vendor Payment (continued)
CASH
PAID BY Options
There are four PAID BY options: Cash,
Cheque, Direct Deposit or Credit Card. For
this company, VISA CREDIT is used as the
credit card name.
Click.
CHEQUE
CASH – The company BANK account is
automatically filled in the From field, indicating
that the funds to be paid would be coming
from that account.
Click.
CHEQUE – Notice that BANK ACCOUNT
appears in the From field, and the next
available Cheque No. is also automatically
entered.
DIRECT DEPOSIT
Click.
DIRECT DEPOSIT - The direct deposit
feature allows you to pay bills electronically
from your bank account. To use this option,
you need to get your company set up with
Sage 50 Accounting.
Click.
VISA CREDIT – Before you can use a
credit card option, you need to set up the
credit card first. You will learn how to do
this later on this slideshow.
Click to continue.
VISA CREDIT
Vendor Payment (continued)
Journalizing Invoice Payment
When you select the vendor from the To
the Order of drop-down list, Sage 50
Accounting will display all the
outstanding invoices for the particular
vendor.
Click
You can then select the invoice that you
wish to pay by using the TAB key from
Discount Available (see arrows) until
the Payment Amount appears. You can
pay more than one invoice at a time. In
this example, only one invoice is paid.
Click.
Notice that the total amount of payment
is automatically entered on the Amount
field on the top portion.
Click.
The resulting Payments Journal Entry is
the same whether you pay by Cash or
by Cheque.
Click to continue.
Vendor Payment (continued)
Pre-printed Cheque
At the right is a cheque printed in
Sage 50 Accounting on plain
paper. It is necessary for a
company to use pre-printed
cheques not only because they
look more professional, but also
because to be valid, your cheque
should include your MICR bank
codes.
Apr 07,2016
Apr 07,2016
Click to see a sample of a cheque
printed by Sage 50 Accounting on a
pre-printed cheque form.
MICR bank codes
Click to continue.
Apr 07,2016
Apr 07,2016
Vendor Payment (continued)
Journalizing Invoice Payment
with a Credit Card
The procedure is the same when paying
with a credit card. However, the
resulting Payments Journal Entry is
different from cash or cheque payment.
Click and study the Payments Journal Entry
for credit card payments.
In effect, your ACCOUNTS PAYABLE is
simply transferred from the vendor to
the credit card company (VISA CREDIT
CARD PAYABLE).
If you do not have the funds to pay for
an invoice, you can pay with a credit
card to take advantage of a significant
discount. However, it will be an
advantage only if you are able to pay
the Visa Credit Card Payable before
you are required to pay interest on the
balance.
Click to continue.
Setting Up Credit Card and
Paying the Credit Card Bill
Credit cards Payable and Expense
accounts are set up in the Settings
option.
Click.
To pay for Visa Credit Card Payable,
first, find out the Credit Card Payable
balance on your Balance Sheet and
credit card statement to see if there is
any difference. To pay the credit card
bill, select Pay Credit Card Bills on
the Home window. (see bottom right)
Click.
The current account balance
automatically comes up in the
Payments Journal as you select the
credit card in the Vendor box. You
can enter additional fees and interest
according to the credit card statement
(see notations on the Payments
Journal), and enter the payment
amount.
Click.
Study the relationship between the
Settings, Payments Journal and the
resulting Payments Journal Entry.
Click to continue.
Balance Sheet
Vendor Payment:
Using Make Other
Payment Option
Earlier you learned that entering
vendor details in the Payments
Journal of a one-time vendor is
optional. You may record a payment
to a one-time vendor without
creating a payables ledger by
selecting Make Other Payment.
Selecting either of the three other
Transaction Type options will not
allow you to select one-time
vendor.
You would also use the Make Other
Payment option for a vendor on file
if you wish to make a payment for
something that does not have an
invoice previously recorded in
your company books; e.g., C.O.D.
purchases, or unusual purchases or
expenses. A good example is
paying a lease or rent. Leasing
companies usually do not send an
invoice. They just expected to be
paid when payment is due.
Study the Payments Journal and the
Payments Journal Entry at the right.
Click to continue.
Vendor Payment:
Adjusting a Cheque
In this example, after creating a
cheque for the month’s rent, you
realized that the rent has increased
from $2,000 to $2,100.00 plus 13%
HST as of April 1. To adjust the
cheque, use LOOKUP to display it
and click Adjust Other Payment
(see arrow). Notice that the window
heading indicates that you are
adjusting the specific payment
(2511).
Click.
Make the adjustments, then check
the Payments Journal Entry before
posting.
Click
To verify the adjustment, display the
Cheque Log in the BANKING
Module Report Centre (see top
right).
Also study what will appear on the
All Journal Entries report when you
select the CORRECTIONS option.
Click to continue.
Journalizing Purchase
Returns (Merchandise)
You would return goods (for resale)
to a vendor for the same reasons
as your customers would return
purchases to you (goods were
damaged, not as ordered, etc.).
When you return goods, you would
normally send back the goods with
a debit memo, since you are
debiting (decreasing) your
ACCOUNTS PAYABLE account.
When the returned goods are
received and verified by the
vendor, the vendor usually sends
the customer a credit memo
indicating that the vendor has
credited (decreased) the amount
owed by you (the customer).
Study the original invoice for the
purchase of goods and the
resulting Purchases Journal entry.
On the next slide, you will learn
how to record the purchase return.
Click to continue.
Original Invoice
Journalizing Purchase
Returns - Merchandise
Original Purchase Journal Entry
(continued)
To journalize the purchase return,
enter the transaction as a
negative vendor invoice. Study the
purchase invoice at the right and
the resulting Purchases Journal
entry below. Notice that taxes
apply only to the returned goods
(not to the full amount of the
original purchase invoice).
Return Purchase (Negative) Invoice
Click.
Review the purchase journal entry
that refers to the original purchase
invoice at top right (also shown in
the previous slide) and study how it
relates to the purchase return
(negative) invoice and return
purchase journal entry (below).
Click to continue.
Return Purchase Journal Entry
Journalizing Purchase
Returns of NonMerchandise Items
Original Purchase Journal Entry
(continued)
To journalize the purchase return of
non-merchandise items, you would
use the same account used in the
original invoice and enter the
transaction as a negative invoice.
Study the return (negative)
purchase invoice at the right and
the resulting purchases journal
entry below.
Return Purchase (Negative) Invoice
Click.
Review the purchase journal entry
that refers to the original purchase
invoice at top right and study how it
relates to the purchase return
(negative) invoice and return
purchase journal entry (below).
Click to continue.
Return Purchase Journal Entry
More…
Go back to your text and
proceed from where you have
left off.
Review this slideshow when
you finish the chapter to better
prepare yourself for the next
chapter. You might also wish
to view the tutorial on Setup
Guide-Vendors in the Sage 50
Accounting Learning Centre.
Press ESC now, then click the
EXIT button.
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