There are several things that accountants should consider in their career. This is especially crucial at the start point of their journey as procurement agents. Among these essentials include knowing the accounts payable. The accounts payable (AP), at this moment, refers to unpaid balance that is typically used to purchase goods and services. AP is always common because it is continuously repetitive regardless of either if one is new or is a veteran in the industry. With accounts payable, there is a guarantee for a credit balance whenever one orders items from a supplier on credit.
Besides, the balance always remains until it is paid for entirely. As a result, the account payable is, then, recorded to have no existing balance. Account payable is essential unless one's firm is cash rich. This article outlines few AP basics that accountants forget but are crucial and useful in the accounts industry.
Determining What AP Includes
Most of the time, chances of qualifying your procurements are high if you purchase them on credit. For production and sales ordered in great quantity, this process is considered excellent. This is because this can be a good intervention where items are bought for production and sales without cash. Accounts payable is also advantageous where there is an allowance for payment provided.
This, however, varies depending on how the supplier wishes to be paid. For instance, the term limit can be paid either in installments or net 30. Net 30, in this case, means that the supplier should be paid within 30 days of the month.
Understanding AP and Expenses
Differentiating between an AP and an expense can be a challenge to many workers. The reason usually has been for the fact that in both cases, there is involvement of money. The fact, at this moment, however, is that with AP, the costs are always incurred but not paid. This is normally because this cash is a liability. To be considered as a liability, it means that a company still owes supplier the money. On the contrary, expenses are the already -paid costs which are related to profits.
Checking For Accuracy by Three Way Matching
Three-way matching is currently the best procedure to ensure the accuracy of AP transactions. This enables accountant to identify the kind of transaction that has taken place in the company. For instance, transactions can be made in numerous ways such as with cash purchase or on credit. To make a proper tracking, nonetheless, there are only three steps required with this procedure.
These include using the purchase order, a shipping order, and an invoice. If further explained in order, it implies that your company bought on credit, the purchased items reached the intended destination, and with an invoice, you are reminded of the period within which you need to clear the creditor's dept respectively.
Filling Purchase Orders Appropriately
For a secure account payment practices, numerous procedures should be strictly followed. This includes various details such as the supplier's address, the unit price of the commodity being purchased, quantity, and the overall cost. Gary M. Kaplan, CPA, a CPA and advisor, in his website explains it well that purchasing forms, in this case, needs to be filled appropriately. This, in turn, can save one a lot of, later on, confusion on purchase order form.
A good accountant is more than just having skills and knowledge. If accountants can implement the above-highlighted practices, there can be a fantastic transformation in the accounts industry. Business owners would experience capability within their firms. With such methods added in business, the petty business problems will, with no doubt, be automatically solved.
