Prior to reading this article, we recommend you read the following article:
The Payables Map covers the process for purchasing, recognizing expense, and paying vendors for services and non-inventoried products.
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Use this article to learn more about the following:
- Create Payables
- Amortized Expense
- Disburse from a Payable
- Vendor Deposit or Prepaid Expense
- Bank Direct Connect
A Payable is a vendor invoice and can be created directly from the Payables tab or from any of the following objects:
- Purchase Order
- Recurring Payable
- Expense Report
- Custom Object
Once a Payable is created, it is posted. Posting the Payable creates the debits and credits in the General Ledger. The credit entry for a Payable is always the Accounts Payable Control GL Account set in the Default GL Accounts screen The debit for a Payable is created to the GL account used on the Payable Line labeled Expense GL account. This is typically an expense type but can also be set to a balance sheet type if the Payable has amortized expense.
If a Payable has amortized expense it is very easy to setup an amortization schedule from the Payable record. The accounting entries for amortization will credit the Unamortized Expense GL account and debit an Expense GL Account. An amortization entry will be made for each accounting period required.
Disburse from a Payable
When a payment is made on a Payable it is recorded as a Cash Disbursement. When a Cash Disbursement is made directly from a Payable the debit GL account is set to the Accounts Payable Control GL Account set in the Default GL Accounts screen. The credit GL account is set to cash (or credit card liability account).
Vendor Deposit or Prepaid Expense
The debit and credit GL accounts for a Cash Disbursement will be slightly different if an advanced payment is made to the supplier prior to receiving the supplier invoice. This is typically called a vendor pre-payment or vendor deposit. In this situation the debit is made to a Prepaid Expense GL account and a credit is made to cash (or credit card GL account). Once the vendor invoice is obtained and approved the Cash Disbursement is reverse applied to the Payable. When a Payable is reverse applied from a Cash Disbursement an additional set of journal entries are created to relieve the prepaid expense booked in the first step. A debit is made to the Accounts Payable Control Account and a credit is made to prepaid expense.
Bank Direct Connect
Accounting Seed is directly integrated to over 14,000 banks and credit card companies. Transactions from credit and debit cards can be directly imported via a live connection to your financial institutions. Expenses on credit cards will typically debit an Expense GL account and credit a credit card liability GL account. Cash Disbursements recorded on credit cards are often not (but can be) applied to Payables.