ACCOUNTS PAYABLE NOTES

What are Golden Rules of Account?

In Personal Account

Debit the Receiver
Credit the Giver
In Real Account Debit what comes in
Credit What goes out
In Nominal Account Debit the Expenses /Losses
Credit the income/gain

What is Account Payable?

Accounts payable is a file or account sub-ledger that records amounts that a person
or company owes to suppliers, but has not paid yet (a form of debt), sometimes
referred as trade payables. When an invoice is received, it is added to the file, and
then removed when it is paid. Thus, the A/P is a form of credit that suppliers offer
to their customers by allowing them to pay for a product or service after it has
already been received.
Example: Company Purchase some materials on credit basis, the Credit period is
span of one month. So until made payment to Vendor, it is treated as dues in
Accounts Payable in balance sheet.

What are the teams in Accounts Payable?

Indexing/ sorting Sorting team will sort the invoice according MM vendor
invoice, finance vendor invoice, Service vendor invoice, and Employee vendor
invoice, date of invoice, vendor Name.

Invoice posting team invoice posting team Posting the vendor invoices, if they
found any wrong (quantity mismatch, amount mismatch, or both , any require field
is missing or not visible proper like invoice no., vendor name etc then they post the
invoice as park document.

Query handling Team Query handling team release the Parking invoice by
solving the query & post that Invoice.

Payment Team This team is responsible for all types Vendor payment Normal
Payment, Advance payment, payment request.

Vendor Reconciliation team: The team is responsible for confirmation the vendor
dues by reconcile vendor payment history in system & Vendor Statement. If they
found any dues still to be paid, they raised supplementary payment or if they found
any overpayment or duplicate payment against duplicate invoice posting by user
they raised credit memo to recovery of over payment or they adjusted the over
payment in next payment once confirmed for superior/manager.

& another responsible to handle the TDS transactions from top to bottom like
Submitting the tds amount in the bank on line, Bank challan receipt number update
& TDS raised to vendor

What is Purchase Order?

Purchase order is a commercial document which is issued by the purchaser to the
seller for ordering goods or serves. Purchase order creates legal agreement between
purchaser and the seller.
It contains
Name of the supplier
Description * specification of material
Quantity ordered
Date & place of delivery

What are Types of Purchase Order?

Standard Purchase order: This PO is created for one-time purchase of material.

Blanket Purchase Order: In this PO delivery schedule are not known clearly.

Contract Purchase Order: In this PO material required are not specified.

Planned Purchase Order: It is a long term agreement purchase Order. In this PO
it specifies materials, estimated costs, and tentative delivery schedules

What do you mean by four way matching, three Way Matching, and two way
matching?

2-ways- we will compare 2 documents - match Purchase order with Invoice

Whatever you have ordered for the PO we will make the payment for the suppliers
in 2-way (we will compare two documents PO and Invoice).
Example: Suppose we had given PO for 100 items, for that we will receive invoice
for 100 items. So that we will make payment for that 100 items.

3-Way matching - we will compare 3 documents - Purchase Order + Goods
receipt +Invoice

Example: Suppose we have ordered 100 items in Purchase Order. But we had
received only 80 items, but we had received invoice for 100 items. So, we will
make payment for only 80 items

4-Way we will compare 4 documents Purchase Order + Inspection + Goods
Receipt + Invoice+

Example: Suppose we have 100 items in Purchase Order .Suppers send us 80 items
we will do inspection on those items whatever we have received, IF 10 items got
damaged. Finally, we are going to make payment to the 70 items only.

What is Down payment Process flow?

This Fundamental is used to give advance payment to vendor to receive the goods.
If it is declared that material receives against advance payment in purchase order,
in this situation purchase department Notified that give down payment to vendor
by create down payment request. The finance Department is converted down
payment request to down payment made on respective due date.
Sap process like :

Down payment Request f-47 (it many times created by purchase department &
infirm to finance department to pay the down payment on that due date)

Down payment Made f-48 (if down payment request is exit first release that or if
not make down payment directly)

Down Payment Cleared f-54 (Cleared the Down payment Against Invoice
number, once vendor invoice posted in the system)

What kind of error can be occurred during Document Posting?

Error of commission this is happened when in invoice quoted amount is 560 and
user entered 650 so it is an error of commission.

Error of omission you totally omitted that invoice in system.

Duplicate invoice posting if double time invoice posted in the system by give
different invoice/reference number.

To avoid this kind of an error you have to create doubt, if you posted same
vendors invoice recently.

Who is indenter?

Indenter is a person who raised the Requirement to procure material.

Example: A manager in finance department needs 2 Printers to purchase. He will
infirm to Purchase Department regarding printer. In this case indenter is
manager.

What is Procurement to pay or accounts payable or purchase Process
flow with Journal entry?
Material Requisition Planning T.CODE
Material Requisition ME51N
Purchaser raised Shortlisted vendors ME21N
Goods Receipts - Raw Material A/c Dr. 500 MIGO
To GR/IR Clearing A/c Cr. 500
Invoice Receipt - GR/IR Clearing A/c Dr. 500 MIRO
To Vendor A/c Cr. 500

Vendor Payment - Vendor A/c Dr. 500 F-53/F-58/F110
To Outgoing Bank Clearing A/c Cr. 500

What are the Sub parts in Accounts Payable in sap?

Vendor invoice Posting
Release Park invoice
Vendor Payment
Reporting
Vendor Reconciliation

What is sap?

Sap is an ERP (Enterprise Recourse Planning). The acronym of SAP is System
Application & Product in Data Process.

What is ERP?

Enterprise Resource Planning system is a fully integrated business management
system covering functional areas of an enterprise like Logistics, Production,
Finance, Accounting, Sales and Human resources etc. It organizes and integrates
Operation processes and information flows to make optimum use of resources such
as men, material, money and machine. ERP is a global, tightly integrated closed
loop business solution package and is multifaceted ERP promises one database,
one application and one user interface for the entire enterprise. ERP system
enhances a manufacturer ability to accurately schedule production, fully utilize
capacity, reduce inventory, and meet promised shipping dates.

What is Company?

Company represents a group. Means it is used for consolidating individual
Company codes.
Example: Reliance Group is company
Reliance Auto mobile, Reliance Perotrolium , Reliance Telecom, Reliance
Insurance, Reliance Multimedia are individual Company codes.

What is Company code?

It represents by four digits alpha numeric keys. It is separate legal entity for which
all financial Statements are drawn like Balance Sheet, Profit & loss Accounts, cash
flow statements , Funds flow statements etc.

What is Business area?

Four digits code (Business area) represents a segment/Responsibility of the
Organization for Which Separate financial Statements are Prepared. It can be
divided by Location wise, Product line wise, segment wise.
Example: For company code 1000 (Reliance Auto) has five location Pune,
Mumbai, Kolkata, bang lore, Delhi branches are different business areas.

What is Fiscal year Variant?

Fiscal/financial year is a combination of 12 months periods. Which stats from
April to March of every year. In sap system there are two types of period one is
regular posting periods of 12 months & special periods of 4 months for the purpose
of accounts adjustment at year end.

What is Document type?

Document types are used to differentiate the business transactions and to manage
how document are stored. Accounts Payable Document types are:

KA = Vendor Document
KG = Vendor Credit Memo
KR = Vendor Invoice
RE = MM Vendor Invoice
KZ = Vendor payment
SA = GL A/C Document

What is Account type?

Accounts Types are used to identification of relevant category like A- Asset, K-
vendor, D-Debtor, M-Material, S- General ledger

What is posting keys?

The posting key controls how the line item is entered and processed
Which side of an account can be posted to whether Dr. Side or Cr. Side?
Which type of account can be posted to A- Asset, K-vendor, D-Debtor, M-
Material, and S- General Ledger?
40 G/L account debit posting
50 G/L account credit posting
01 Customer invoice
11 Customer credit memo
21 Vendor credit memo
25 Vendor payment
31 Vendor Invoice

What is Reconciliation Account?

Reconciliation Account is ledger account, which is updated through Sub-ledger
account. We could not post directly into reconciliation. All individual Vendors are
Sub-ledger accounts.
PK Transaction vendor Debit PK Transaction vendor Credit
21 Credit memo 31 Invoice
22 Reverse invoice 32 Reverse credit memo
24 Other receivables 34 Other payables
25 Outgoing payment 35 Incoming payment
26 Payment difference 36 Payment difference
27 Clearing 37 Other clearing
28 Payment clearing 38 Other clearing
29 Special G/L credit 39 Special G/L credit

Example: Vendor Reconciliation account is a Ledger & Ram, Hari, Gopals, Sudam
accounts are sub ledger accounts. When post the Rams invoice. Ram sub-ledger is
updated as open item dues as well as Vendor Reconciliation account is update
through RAM. If post all vendors invoice then reflection will be as below

Vendor Recon. Acct =Ram dues+ Haris dues + Gopals Dues + Sudams dues
1000 = 100+200+500+200

What are the Special Gl indicators used in sap?

Special GL indicators are used to identify the special transaction. This reflects in
vendor line item report under Special GL indicator column.

F- Down Payment Request
J- Simple Payment Request
A-Down payment made
w- Bill of exchange Payment
G- Bank Guarantee.
L Letter of Credit Payment.

What is noted Item?

When you note down something to be paid in future that is Called as Noted item.
Noted item has no effect in books of accounts. Transactions like Down payment
request, payment request, and bill of exchange payment until release, letter of
credit until release.
It is displayed in vendor line item report under Special GL indicator column.

What are Special Gl transactions?

Apart from normal transaction like invoice posting & simple vendor payment are
called special gl transactions. Example Down payment made.

What is line item?

Line item that provides a detailed information about the document like amounts,
posting date, due date, dues, not dues, over dues, open item or cleared item etc.

What is open item?

Items are identified by Red colour which represents as dues/not dues not paid yet
to vendor

What is cleared item?

Items are indentified by Green Corlour Square button which represents payment
has been made to vendor.

Difference between partial & Residual payment?
Partial Payment Residual payment
In partial payment, partial amount can
be paid & this document will reflect in
open item in vendor line item report
until full settlement the dues.
Example : Vendor dues 1000
Partial amount paid 400
System response dues is 600 but 400 &
1000 will appear you in red colour
open item.
When you paid remain 600 then total it
will be displayed in cleared item.
Here you also make partial payment to
vendor but one thing is that Residual
item amount is generated a new open
item with new document number.
Example : Vendor dues 1000
Partial payment = 400 is paid
Remain Residual item amount = 600 will
be created as open item automatically by
system
So 400 will be cleared & displayed in
cleared item. 600 will be displayed in
open item.

Difference between Hold Document & Parked Document?
Holding Document Parking Document
Holding Document is hold by temporary
number whatever given by user.
Parking document is created with
internal number range
Holding document is only
viewed/changed by user
Parking document can viewed &
changed by anyone
Hold Document in SAP means It is for
short term and is being used when SAP
transaction Debit or Credit is uncertain
and generally its is used for external
purpose for example Advance from
unknown customer etc.
SAP Park Document means for longer
period and is generally used for internal
purpose. Till approval take place etc.
after this SAP parked document posted
in SAP.

Difference between vendor invoice posting by transaction code screen FB60 &
F-43?
FB60 SCREEN F-43 SCREEN
Single screen data entry Multiple screen date entry
Automatic document type, posting
key updated by the system.
Manually enter Document type, Posting key
in the system.

Difference between vendor Payment posting by transaction code F-53 VS F-58
VS APP
F-53 F-58 F110 APP
Multiple payment posting
Manually
Multiple payment posting
manually with Form print
Multiple payment
Automatically with form
printing by set parameter in
APP.

What do you mean by posting date, Document date, Value date, clearing date
& Base line Date?
Posting date Doc. Date Value date Clearing Date Base line date
On which date
document is
posted into
system
invoice quoted
date is document
Date to be filled
in document Date
field
Use full for
Bank
Clearing date is
auto updated
once payment
made or cleared
the document.
To calculate all
Due dates with
reference to
payment terms.

What is APP?

APP is nothing but Automatic Payment Program is used to make huge payment to
huge number of Vendors at a time, where system clears the vendor accounts &
prints the Check, Payment advice & payment summery automatically. The
transaction code to run the APP is F110.

How payment is executed through APP?

Set the Parameter >>> Give proposal Edit proposal if any need to edit
>>> payment run >>>print the forms.
You launch transaction F110 and specify parameters for the selection of items to
be paid. Then you run Proposal Run which creates Payments Proposal. This
proposal is analyzed by Treasury / Accountants / somebody else and then it is
approved immediately or with some corrections. After that you run Productive
Run. At this moment postings are done (or not done see separately). When
Productive Run is finished, you can create payment file or paper payment
documents for the bank and/or payment recipients.

Terminology in APP
set the Parameter set the payment parameter to executed the app where run
date, identification code, company code, Payment method, next run date & vendor
code are compulsory to filled up.
Give proposal to run you give Proposal to system to consider invoices for
payment as per your set parameter. If any invoice with red color those need to be
release by edit proposal.
Edit Proposal: here you release the invoice for payment by avoid the payment
block, assign payment method, House bank by reallocation functionality.
Run payment: at last once clarified proposal you make payment by press payment
run button.
Free selection tab: it is help full if management wants payment to be made by
document type wise, posting date wise, profit center wise or any other aspect wise.
You can specify by assign respective value in these fields.
Additional Log: You can define criteria for an additional log. If you call up the
log later on, the system displays the processing logic of the payment program in
appropriate detail. Before doing anything, you should read the note under
Checking the Log in "Creating the Payment Proposal".
The following processing steps can be logged.
Due date check
Payment method selection in all cases
Payment method selection if not successful
Payment document items
Procedure
For the additional log, choose the Additional log tab on the Automatic Payment
Transactions screen. Click next to the corresponding option and enter the account
numbers of the vendors or customers.
Next payment run date: This date is needed in order to check the due date of
payables. If an item is already overdue on the date of the next payment run, or
would lose cash discount, the system pays the item in this payment run. In real
time most of companies are run app in every fortnightly. Run schedule is in-
between 1
st
and 15
th.
You run app on 1
st
date of the month and two items has due
date on 3
rd
and 5
th
of the month, it will be overdue on next payment
run (15
th date
) or some item are falls under cash discount due date 31th , then if
you keep 31
st
date in NEXT RUN DATE field, system pays these item in this
payment run and you get cash discount benefits.


Invoice under Exceptions:

When executing the automatic payment program (F110 transaction), a proposal
run must always be carried out in SAP system first. The proposal list will
sometimes include exceptions or it is displayed with red color error button.

Common exceptions are:

SAP Invoice contains payment block. To pay this invoice, remove the payment
block when editing the proposal list (unless the payment block is one which cannot
be edited during payment proposal) or remove payment block via FB02 for each
SAP invoice.

Payment method in vendor master/invoice is different from the one specified in the
payment program parameter. To pay this invoice, allocate the payment method in
the parameter of the payment run to this invoice while editing the proposal list.

Vendor master does not contain information specified as mandatory in the payment
method in the parameter of the SAP payment program. For example, depending
on the payment method configuration for the country, certain fields such as city or
PO Box must be populated in the vendor master. In this case, delete the proposal
run, make the necessary changes in the vendor master and execute the proposal run
again.

Typically, payment program pays due invoices in full. To cater for partial
payment via automatic payment program, payment request will be used (optional).
Down payments to staff and vendor can also be made via the automatic payment
program if down payment request was posted.

If foreign currency invoice is paid via automatic payment run, the relevant
exchange rate type should be selected in the payment run parameter. Exchange rate
gain/loss on making the payment will be automatically posted to the relevant profit
and loss account based on the reconciliation account of the vendor.

The payment method specified in the parameter of the payment program
determines the bank account and the GL account used to make the payment. Also,
depending on the payment method, cheques, other forms and payment files will be
generated.


What is Vendor Reconciliation?

It is Month end activities once Full accounts payment process is completed by
payment to vendor. The vendor reconciliation team reconciles payment by
matching Vendor statement with system payment history. They confirm whether
any dues to be paid if any, they raise supplementary or any amount to be collect
from vendor by raise credit memo.

Country India version (CIN): Indian taxation & withholding
tax (TDS)


What is TDS/withholding tax & its process Flow?

TDS (Tax Deducted at Source) is deducted at source of vendors income. We can
Charge TDS when we receive Govt. specified services from vendor & that person
should eligible as per Govt. slab incomes.TDS can be deducted at the time of
payment to vendor or vendor invoice processing which is ever is earlier.

What are the Section codes, percentage rates & Slab rates in TDS?
Follow the link: http://finotax.com/itax/tds0910.htm

All forms related TDS:
Follow the below link: http://taxworry.com/new-form-16-form-16a-form-24g-
form-27d-notified-download-now/

What are due dates for TDS payment

Due Date Table for TDS and TCS quarterly returns: Quarter
Form 24Q Form 26Q Form 27Q Form 27EQ
First July 15
th
July 15
th
July 14
th
July 15th
Second October 15th October 15th October 14th October 15th
Third January 15th January 15th January 14th January 15th
Fourth May 15
th
May 15th May 15th May 15th

Tax deducted by company
Time to deposit TDS (due date to deposit tds) Rule 30
1 tax deductible in March 30th
April of next year
2 other months & tax on perquisites opted to
be deposited by employer 7th of next month

Note: Assessing officer, with prior approval of Joint commission, may permit quarterly payment
of TDS under following sections
Section Description quarter of Financial date of payment
year ended on
192 salary

30th June
(1
st
qtr)
7th
July

194A TDS on interest other
than securities
3th September
(2n qtr)
7th October
194D TDS on insurance
commission
31st December
(3
rd
qtr)
7th January

194H TDS on commission 31st March
(4
th
qtr)
30th April
Note:TDS is to be deposited online mode only through Debit card or Interenet banking Mode,
except in case of Book adjustment by Govt Offices