Difficulty Level: Beginner Level AccountMate User
Version(s) Affected: AccountMate 7 for SQL and Express, AccountMate 6.5 for SQL and MSDE, AccountMate 6.5 for LAN
Module(s) Affected: PO and AP
Posting Date: 12/20/2006
One of the most important accounting principles is the timing of asset recognition and liability accrual in the company’s books. Assets can be recognized and liabilities can be recorded at the time when the actual ownership of the items has been transferred to the buyer.
You can configure AccountMate to record the asset and the corresponding liability upon receipt of the purchased goods. AccountMate provides for the reversal of the accrued liabilities when the Accounts Payable invoices are created.
A. Setting Up the Feature
In the PO Module Setup window General (2) tab, you have the option to enable the Accrue Received Goods feature for new vendors; simply mark the Accrue Received Goods checkbox in the Default for New Vendor section.
AccountMate offers two methods of accruing received goods: By Quantity and By Amount. Each accrual method differs on how the reversals are handled. Please refer to the table below for the advantages and disadvantages of each method:
ACCRUAL METHOD BY QUANTITY ADVANTAGES
• More Flexibility
When reversing the accrual, AccountMate allows the user to enter the invoiced quantity and unit price of each line item.
• More Precise Accountability
This accrual method allows you to keep track of your invoiced and un-invoiced purchases on a deeper level. You can review remaining quantities that have not yet been invoiced.
ACCRUAL METHOD BY QUANTITY DISADVANTAGES
If each invoice contains several line items, it can be very time consuming for the user to enter each line item’s quantity and unit price.
• May Encounter Difficulty upon Reversal
If the information in the invoice does not contain line items and quantities invoiced, the user will not be able to reverse the accruals.
ACCRUAL METHOD BY AMOUNT ADVANTAGES
• Time Efficient
When recording the reversals, the user saves time because he/she does not need to find and enter the details.
Furthermore, if the detailed information (i.e. quantity invoiced and unit price) is not available, the user can still proceed with the reversal as long as purchase order number(s) are included in the invoice provided by the vendor.
ACCRUAL METHOD BY AMOUNT DISADVANTAGES
• Difficult to Reconcile
In instances when there are discrepancies between the invoice and purchase order amounts, it may take a bit more time to reconcile which line items have been invoiced and at what price they are invoiced; especially if price adjustments are present.
The pros and cons of both accrual methods have been presented above. In deciding which method best suits your company, you must consider the nature of your company’s business. Be careful when selecting the accrual method; once you have entered a received goods transaction, you can no longer amend it.
In AccountMate 7 for SQL and Express (AM7), companies using line item taxation can select only Accrual by Quantity. This holds true for the companies created in AccountMate 6.5 for SQL and MSDE (AM6.5 for SQL / MSDE). On the other hand, AccountMate 6.5 for LAN (AM6.5 for LAN) can only accrue received goods by amount.
Assign the GL account IDs that will be used as the Inventory account for Non-Stock Items and the Liability account for the received goods accruals in the PO Module Setup window GL Accounts tab.
To check whether all the vendors are accruing received goods, access the Vendor Maintenance Settings tab of each vendor record and ensure that the Accrue Received Goods checkbox is marked.
B. Getting Started with the Feature
1. Recording the Accruals AccountMate automatically generates an entry upon saving the transaction in the Receive Goods function; provided that the vendor of the purchase order is set to accrue received goods. The entry that will be created is as follows:
DR: Inventory* XX CR: Accrued Received Goods Liability XX
* AccountMate will use the GL Account ID assigned in the respective inventory records for stock items. For non-stock items, AccountMate will utilize the GL Account ID set up in the PO Module Setup function.
2. Reversing the Accruals Reversing the accruals reclassifies the Accrued Received Goods Liability account to the Accounts Payable account. To reverse the accrual made for purchase order receipts, you must perform the transaction in the AP Invoice Transactions function. There are two ways to get into this function: (1) by manually clicking the AP Invoice Transactions function in the AP Module Transactions menu or (2) by clicking the Post AP button in the Receive Goods save window. In the AP Invoice Transactions window, click the Overwrite Reversed Accrued Amount button, which is located next to the Rev Accr Amt field. The following are the important information that you should take into consideration:
a. If Accrued by Quantity The Reversed Accrued Purchase Orders window displays all the purchase orders and inventory items received but not yet invoiced in AccountMate. Based on the invoice provided by the vendor, enter the invoiced quantities in the Reverse Qty column and the unit prices in the Vendor Price column. The difference in the purchase order unit price and the invoice unit price is displayed in the Price Adjustment column. By default, the total amount of price adjustments is posted to the Cost Adjustment account; however, you may overwrite the GL account ID in the AP Invoice Transactions window GL Distribution tab.
b. If Accrued by Amount The Reversed Accrued Purchase Orders window displays the received purchase orders that are not yet invoiced; the inventory items per purchase order are not displayed in the grid. Based on the invoice supplied by the vendor, enter the invoiced amounts in the Reverse Amt column; the value in this column should not exceed the values in the Unreversed Amt column. In instances where the vendor invoiced the purchase orders at higher or lower prices, enter the proportionate amount if the vendor partially billed the purchase order in the Reverse Amt column. All price adjustments should be incorporated in the Invoice Amt field of the AP Invoice Transactions window Information tab. If you want to capitalize the price difference, amend the entry in the GL Distribution tab.
3. Timing in the Recording of Freight Charges and Sales Taxes For AM7, order type and line item taxation companies vary in the timing of recording freight charges and sales taxes. For order type companies, freight charges and sales taxes are posted to the general ledger upon the receipt of goods. On the other hand, freight charges are recorded upon the receipt of goods and sales taxes are posted upon reversal of the accruals for companies using line item taxation.
4. Amending / Voiding the Accrued PO Receipt Reversals To amend the accruals made, simply re-access the AP Invoice Transactions window, choose the Amend Invoice option in the list box (instead of Post AP Invoice), and select the Invoice Number where you made the reversal. Click the Overwrite Reversed Accrued Amount button and make the necessary changes in the Reversed Accrued Purchase Orders window. If you want to void the reversal, zero out the Reverse Quantity or the Reverse Amount columns. Another way of voiding the reversal is to void the AP invoice itself.
NOTE: AP invoices that are fully paid are no longer accessible once the period, when the invoices were fully settled, is already closed.
C. Generating the Report At the end of each period, after you have entered the accruals and the reversals in the system, you need to evaluate the remaining items not yet invoiced by the vendor. In order to achieve this objective, generate the Accrued Received Goods Report. This report will also assist you in reconciling the amount of accrued received goods recorded in your general ledger.
You have the option to filter which information you want to be displayed in the report. The report filters available are as follows: purchase order number, vendor number and receive date (accrue date).
You can also direct AccountMate to show/hide supplemental information. Each AccountMate version has different options to offer:
1. In AM7 and AM6.5 for SQL / MSDE, you may include those fully reversed purchase order receipt accruals in the report by marking the Include Fully Reversed Accrued Items checkbox. Also, if you have activated the Multi-Currency feature in the PO module, you have the option to show the foreign currency amounts in the report by marking the Show Multi-Currencies checkbox.
2. or AM7 line item taxation companies, you have the prerogative on what will be shown in the report. You may want to display in the report the un-reversed amounts or the invoiced amounts of the purchased order receipts by selecting the Show Unreversed Amount or Show Invoiced Amount checkboxes, respectively.
3. AM6.5 for LAN provides the option of showing the invoice reversed amounts and the invoice details by marking the Include Invoice Reverse Accrued Amount.
Understanding on how the Accrued Received Goods feature works will greatly help the users in handling accruals of purchase order receipts.
This information is provided "AS IS" without warranty of any kind. AccountMate disclaims all warranties, either express or implied. In no event shall AccountMate be liable for any damages whatsoever including direct, indirect, incidental, consequential, loss of business profits, or special damages, even if AccountMate has been advised of the possibility of such damages.
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Difficulty Level: Beginner Level AccountMate User