As a part of accounting fundamentals, all accounting professionals are assumed to clarify what occurs within the accounts payable. If you have no accounting expertise, do not hesitate to let experts from an accounting firm in Malaysia help you.
The Accounts Payable account is an open account that lies within liabilities or creditors. If a company purchases products in advance, the purchases are made on credit while the invoices are recorded in the Accounts Payable. As a part of double entry accounting, the Accounts Payable needs to be credited, while one more account is debited when the supplier billing needs recording.
The objective of the Accounts payable procedure is to identify legal invoices and bills of the corporation. Before the billing issued by creditors is entered into accounting (Also see The Accounting Estimates That the Accountants Use) documents, the invoices must include the corporation’s purchase order, what the corporation has received, additional terms and even more.
Yet another advised accounting practice for accountants would be to ensure that there are internal controls for the accounts payable process. This ensures that the company’s assets are guarded. Internal control’s account fundamentals consist of fraudulent invoice settlement avoidance, inaccurate invoice settlement avoidance, double settlement avoidance, and organization practices to ensure all supplier payments are accounted for.
Purchase orders are highly recommended to be prepared by companies. Relevant departments should have the capacity to obtain a purchase order replicate describing:
- A Purchase order number.
- Company name.
- Supplier name.
- Amount of acquired things.
- Unit costs.
- Date required.
- Delivering methods
- Other relevant information.
Delivery order should also be generated to document products the company has obtained, as they will utilize them to reconcile with the purchase order details.
Once both purchase and delivery order have been integrated, they will require comparison with the supplier’s invoice in an accounting practice referred to as a three-way match. The three-way match includes the distinction of service or product description, amount, rate, terms of purchase order, illustration and amount of the delivery order, and the amount, price, and billing terms. The process is done when all three papers remain in the agreement, and the supplier’s billing will be input right into the Accounts Payable for credit plan.