1. GE Capital Accounts Payables Module

3. Accounts Payable Overview In this topic, you will learn to: Explain the Origin of Accounts Payable

4. Exchange began when mankind first engaged in transfer, that is, when two parties with surplus resorted to barter obtaining goods as an alternative. Barter then evolved into the fine art of selling. Early men produced everything they consumed. Gradually, they formed groups and created an opportunity for trade or exchange. Exchange therefore contributes to surplus and economic growth. Such exchange resulted in the production and marketing of goods and services. Origin of the Exchange process

5. Four stages in the provision of satisfaction Stage 1 Obtaining Resources Stage 2 Producing Goods & Services Stage 3 Making Intermediate Exchanges Stage 4 Consuming Goods & Services The relationship between intermediate exchanges and the consumption of the goods and services gave birth to payment for such goods and services. We slowly shifted from barter to paying money for the consumption of goods and services. This gave rise to ACCOUNTS PAYABLES!

6. Let’s understand the process of Payables!!! I want to buy a few things for home! Joan rushes to the market...

7. Let me pick up all these!!! The bill is made by the counter person for $136.25 Joan gives a credit card to pay the bill

9. Sourcing - The process of purchasing In this topic, you will learn to: Discuss the Procurement process

10. Sourcing is the first phase in the Procurement process, where information is gathered and research is done in order to enable the best procurement decision. Let’s take a look at the purchasing process: Procurement Receiving

12. Bid - This refers to accepting quotes from potential suppliers over a predetermined period of time. Catalog - Product information is available with description and price, based on which order is placed. This option is used for short term or immediate supplies. Standard - Business identifies the vendor and negotiates the terms of payment. It also approves the vendor as the authorized supplier. This method is used for long term supplies. Types of RFQ

13. Sourcing Process

14. Highlevel Process Maps In this topic, you will learn to: Describe the Accounts Payable process flow

15. Process of purchasing Multiple options for the purchaser...requiring multiple processing. Buyer orders goods or services No Purchase Order (P.O) used Purchase Order (P.O) used Manual P.O used Mechanical P.O used

16. Products and Services AP processes invoices raised for products and services! Products: Goods like medical equipment, computer peripherals, industrial instruments, etc. are examples of products purchased Services: Invoices raised on services like repairing, cleaning, telephone service, etc. For example, installation carried out by technicians/engineers…PO is not raised for utility services like gas, fuel, electricity, etc Service Engineers from GE or third party vendors carry out services.

17. Requirement for materials / services arises Vendor ships materials Approve invoice for payment Payables department verifies invoice and makes payment Requisition sent to Sourcing Department Buy to Pay - With PO Vendor sends order and invoice to buyer Create agreement or communicate Purchase Order to supplier

18. Buy to Pay - Without PO Requirement for materials / services arises Vendor ships materials Requisition sent to Sourcing Department Vendor sends order and invoice to buyer Buyer approves invoice for payment, assigns account number Payables department verifies invoice and makes payment Create agreement or communicate Purchase Order to supplier

19. Accounts Payable - Critical Documents In this topic, you will learn to: Illustrate the Accounts Payable work & describe the importance of some documents

20. What is Accounts Payable in GE? GE Medical Systems Office 10 machines @ $12,100 are ordered I, at GEMS raise the Purchase Order

21. Goods are shipped to GEMS GE Medical Systems Office creates a GRN on receipt of goods Goods are purchased on credit from XYZ Inc., the vendor

22. Accounts Payable must process the invoice , for payment on the due date!!! XYZ Inc. raises invoice payable after 45days

23. Accounts Payable Work! Payables department receives invoices through courier, mails, scanned invoices, etc. Are goods and services received? VERIFY Goods Received Note! Check if the vendor set up in the system Verify if the invoice is a duplicate! Do a Preliminary check: Can the vendor be paid? Should he be placed on HOLD? Should payment be redirected? Process the invoice in the system (Enter details as required to make the payment on the due date) Vendor receives payment…. Invoice gets paid on the due date

26. Goods Received Note (GRN) - The purchaser of goods and services would issue a notification that the ordered goods and services were indeed received. This is an acknowledgement of receipt of goods and services. It is called as a “Goods Received Note”(GRN). It indicates who received the purchase, when it was received, and whether all or a part of the order was received. In the United States of America, Goods Received Note is also known as a ‘Receiver’!

27. Invoice - To pay, we need an invoice which describes who has to be paid, what has to be paid for, and the amount due. Invoices generally contain payment terms, which represents the timeframe that can be taken for which payment can be made to the vendor. It is provided by the vendor. It is in mutual interest to make prompt payment. For example, it may be a common practice to offer an x% discount on the purchase price of the goods or services, if the invoice is paid in full within X days. Invoices with Purchase Orders are referred to as a PO Invoice.

28. Appliances Inc. is a retailer of refrigerators and television sets. He places orders from some manufacturers for the following: 10 television sets - Model X-123 DBB of Onida Inc. (21inches)[Part # 316-52] 3 television sets - Model Big Screen34 of LG International (29inches) [Part # 26-1] 6 refrigerators - Double Door Super Cooling of LG International [Part # 689-00] 3 refrigerators - Single Door Model 56B of P&G Inc. [Part # 238-7] What does Appliances Inc. do?

29. These goods are purchased on credit from the respective manufacturers at the below costs: Cost of Model X-123 DBB of Onida Inc. television: $2480 each piece Cost of Model Big Screen34 of LG International television: $3436 each piece Cost of Double Door Super Cooling of LG International refrigerator: $1510 each piece Cost of Single Door Model 56B of P&G Inc. refrigerator: $850 each piece

32. 3 critical documents - In detail In this topic, you will learn to: Appraise the nature of the PO,GRN and Invoice & Identify the different types of invoices

33. PO Creation Requirement for materials / services arises Reaches the requisitoner Analyze the vendor / supplier Create request for quotations Quotations received from supplier Analyze the Quotations Create agreement or communicate Purchase Order to supplier Requistioner gets in touch with Sourcing Contacts requisitoner for details e.g. Timelines, Price, Qty Designated Buyer identified Designated authority approves

35. Standard Purchase Orders are created for one-time purchase of various items. These purchase orders are created when buyer knows the details of the goods or services, estimated costs, quantities, delivery schedules and accounting distributions. Standard Purchase Orders

36. Blanket Purchase Agreement Blanket purchase orders are created when buyer knows the details of the goods or services to be purchased from specific supplier in a period, but buyer do not yet know the detail of delivery schedules. Blanket purchase orders are used to specify negotiated prices for items before actually purchasing them. Blanket purchase orders can also be raised when the actual amount involved in the transaction is not known, when extra business is expected, etc.

37. Contract Purchase Agreement Contract purchase agreements are created with supplier to agree on specific terms and conditions without indicating the goods and services that will be purchased. Buyer can later issue standard purchase orders referencing contract agreement.

38. Planned Purchase Orders A planned purchase order is a long-term agreement committing to buy items or services from a single source. Buyer must specify tentative delivery schedules and all details for goods or services that are to be purchased, including charge account, quantities and estimated cost.

39. Materials shipped by vendor Requisitoner receives the material Inspect Goods Rejected Accepted Goods are returned to the vendor/supplier Good Received Note is raised by Requisitioner/Stores Dept. Receiving Is done by buyer Receiver creation Once the receiver is received, it has to updated in the system. An entry is passed and the Payables Representatives will be able to view this entry. Such entry is termed as ‘Receiving’

40. Critical fields in an invoice with PO: Invoice - Key fields Invoice Date PO Number Part Number Total Invoice Amount Remit To Address

41. Non-PO invoice - Invoices not against a purchase order is termed as a Non-PO invoice. A purchase order does not exist for certain invoices because the value of the service cannot be ascertained. In such cases, there exists a difficulty in ascertaining the amount for which a PO has to be created for. Mostly, all utility bills, check requests and A/R refunds are Non-PO. For example, rental bills, gas and fuel payments, electricity bills, freight payments, requisition from Accounts Receivable to return payments to vendors etc are Non-PO invoices. Invoices without Purchase Orders are referred to as a Non-PO Invoice.

42. Critical fields in an invoice with No PO: Invoice - Key fields Invoice Date and Number Remit to address Account Code Amount due Approval

43. Vendor Set Up In this topic, you will learn to: Illustrate the method of setting up a new vendor

44. Vendor set up is the process of updating in a database, the vendor details like vendor name, site address, payment terms, etc. The details of new vendors are to be included in this database which will assign a unique vendor code with which you can process the invoice. Even changes to existing vendors are to be made as and when required. Before setting up a new vendor, check if the vendor has already been set up. Sometimes, approvals are required from the buyer to set up vendors. In such cases, required approvals are also a mandate for vendor set up. Invoice cannot be processed or paid if vendors are not set up!!!

49. During vendor set up, check for the tax id/SSN …… Tax ID: A number provided by the IRS to an individual or a business which identifies them for tax reporting purposes. This is also called as Federal Id. Social Security Number: Social Security Numbers were introduced by the Social Security Act of 1935. They were originally intended to be used only by the social security program. In 1943, Roosevelt signed Executive Order 9397 which required federal agencies to use the number when creating new record-keeping systems. In 1961, the IRS began to use it as a Taxpayer Id. SSN is also termed as ‘EIN’ (Employee Identification Number). Check for Tax id/SSN

55. Accounts Payable - Terms and Concepts In this topic, you will learn to: Describe the Accounts Payable terms and concepts

56. Buyer - Refers to the company/individual placing the order for goods and services To buy goods and services, a requisition is made by the buyer.

57. Vendor - A company or an individual that/who sells goods and services to another business or individual. It/He is also referred to as the Supplier . The unique number assigned to identify a vendor is termed as a vendor code Vendors who do not belong to the United States are Foreign Vendors

58. One Time Vendors There are certain vendors with whom we do regular business and their names are already set up in the system with a vendor code. However, very often we do a number of adhoc purchases from new vendors. We may never buy from that vendor again. Such vendors are One time Vendors. For Example: Gallopine Inc. employs temporary engineers to do some repair work at XYZ Inc. The repair work amounted to $125 which included purchase of a spare part from Indsys Co., a vendor from whom we normally don’t buy. Indsys Co. is thus set in the system as a One Time Vendor. Be careful while paying - There will be only one invoice and discrepancies cannot be deducted from another invoice

59. Part Number - Number used to identify specific parts ordered or received. A model number of a particular product can be referred to as a part number. Refer Appliances example, 316-52 : Part Number of Model X-123 DBB of Onida Inc. (21inches) 26-1: Part Number of Model Big Screen34 of LG International (29inches) 689-00: Part Number of Double Door Super Cooling of LG International 238-7: Part Number of Single Door Model 56B of P&G Inc.

60. Price - Refers to the amount paid towards purchase of goods and services. The price per item multiplied by the number of items ordered or received is referred to as ‘extended price’. The price per item is termed as ‘price per unit’.

61. Ship date - Date on which the goods and services are shipped by the vendor to the buyer. Normally, it is also the date on which the title (ownership) of goods and services is passed to the purchaser

62. Remit-to address - Refers to the vendor’s address to which the payment for goods or services is to be sent. The remit-to address might be the vendor’s address or any other address to which payments are to be made. Shipment address refers to the address to which goods and services purchased are shipped. The shipment address will never be the same as the remit to address. Shipment address is for Buyers and Remit-to address is for suppliers! Drop shipment refers to shipping goods and services directly to the end customer’s site!

63. Terms - The credit period within which the payment is to be made to the vendor. It normally varies from 30 to 60 days. An invoice stands due on the last date of the term date. Discount due date: Date by which if payment is made, earns a discount Net due date: Date on which is invoice is due for payment Example, ABC Co buys goods on credit from DEF Inc. on 01-01-2002 to be paid after a period of 30days. If ABC Co pays on 01-15-2002, it will earn a discount of 10% and the due date for payment is 01-31-2002. Discount due date: 01-15-2002 Net due date: 01-31-2002 Discounts can be earned on an invoice depending on how early the payment is made before the due date!!!

64. Service charge - A fee charged by a vendor for a service performed or for a particular part ordered on an invoice. Vendors may employ temporary engineers to service a particular product.

65. Tax - A charge imposed by a federal, state or local body (Regulatory bodies) for the sale of goods and services. It is usually stated as a percentage. The tax element is given on the face of the invoice. The type of tax claimed would depend on the province/state to which the goods and services are shipped. Tax is paid on an invoice based on agreed contract terms and conditions!

66. Approval - Certain invoices require approval from an authorized person Approvals are required to vouch for payment of invoices. Specific approvals are needed for high dollar invoices or for invoices which are not PO based. Approvals given on the face of the invoice are termed as ‘Face Approved Invoice’ . It is generally written ‘OK to Pay’ on the face of the invoice signed by the authorized signatory. Business rules decided the number of approvals required

67. Code correctly - Financial Planning Analysts need to identify the expenditure incurred by a particular cost centre! Account Distribution Number - Refers to the complete general ledger account number to which a transaction is coded to. Each account number can be broken into several Components, like the GL code, Product Code, Cost Centre, etc. GL Code: A code which represents each GL account. Cost Centre: Refers to a unit within a concern/ firm to which the transaction has to be coded to. For example: Freight paid to GEMS on purchase on MRI Scan will be charged to the below account 01.111.1336.2521.000.001.12 GEMS Ultrasound. MRI Scans. Model Number. Freight. Default . Zone . Area .

68. Three way match - A matching of the Invoice, Purchase Order and the Receiver. Moving to Appliances Inc. example, note that there was an order for 3 refrigerators [Single Door Model 56B] from P&G Inc. each costing $850. 2 refrigerators of the same part and price were received by them and goods were invoiced for the total amount of $1700 for 2 quantities. Order Quantity: 3 Unit Price: $850 Extended Price: $2550 Part Number: 238- 7 Here, the amount/quantity/part ordered, received and invoiced match. Although 1 quantity is received less, 2 were ordered, received and invoiced. Thus, the vendor can be paid. Received and Invoiced Quantity: 2 Unit Price: $850 Extended Price: $1700 Part Number: 238- 7

69. Voucher - Each invoice is assigned a unique voucher number. For example, ABC Inc sends an invoice (Invoice # 123456) to Indsys Co. Indsys Co. also receives another invoice from XYZ Inc (Invoice # 123456). There is a possibility that Indsys Co might end up paying only one invoice, since both carry the same number. Thus, one invoice number can be used by several vendors. In such cases, the invoice number is not a unique one. Hence, every invoice number is assigned a unique voucher number. A voucher number may not exist if the invoice number is unique across different vendors!

70. Utilities - The term refers to the basic amenities used for in-house consumption. For example, gas, water, electricity, telephone, etc. All these invoices are only service related invoices and are Non-PO. Prompt payment of a utility bill will not earn discounts. Non payment of an utility bill will lead to disconnection of services!!!

72. Discounts - Invoices earn discounts if the buyer chooses to pay early and/or with cash. The date by which, if payment is made will earn discounts is termed as the “ discount due date”. There are two types of discount, cash discount and trade discount.

75. Tolerance - Any variation in ordered price/quantity vs. invoiced price/quantity would result in matching discrepancy during three way match. Businesses to reduce rework fix tolerance limits. It refers to a standing approval to bypass certain set rules and pay invoices with matching discrepancy upto a specified dollar value or percentage. Let’s assume that Appliances Inc. fixes the tolerance limit as 5%. The actual invoice amount is $19,368, however, it was raised for $20,300 and paid. Was the AP Rep right by paying the invoice? Yes, The AP Reps can process the invoice up to $20,336.40 (5% tolerance - $968.40) Tolerance limits differ from business to business

77. Line Item - Multiple goods or services may be ordered in a single purchase order. For ordering each type of goods and services, a separate PO line would be created containing information like part description, quantity ordered, ordered price, ADN (Account Distribution Number) to be debited etc. Each of such separate line is referred to as a PO line or line item.

80. Blanket PO - A purchase order is sometimes raised on a roughly estimated amount. It is so created because the exact value of the purchase or the service might not be known at the time of creation of the PO. In such cases, an estimated amount is created as a PO amount. For example, A PO may be created for $12,500 and then several invoices of a vendor are linked to this particular PO.

83. Invoice types In this topic, you will learn to: Explain the different invoice types

86. It is also known as Electronic invoicing. It works on a web based application. Suppliers use this application to view invoice information and payment status online. Invoices need not wait for the mailing time to Accounts Payables, because it also allows the suppliers to create invoices and submit them electronically by keying all necessary details. Web invoices Continued

88. EDI Provides a translation channel through which invoice date can be exchanged between the buyer and the suppliers. EDI is defined as the exchange of computer to computer, standard business documents in electronic format. It streamlines the paper process into an efficient and less time consuming electronic process. Continued

91. Evaluated Receipt Settlement (ERS) payment is triggered on receipt of a product/service. The pay amount is the negotiated price as reflected on the Purchase Order. Suppliers need not send paper or electronic invoices for received materials. It is a simple process which establishes a match between the receipt information and the purchase order information. When a supplier delivers materials, the action of verifying receipt through an automated system will generate a receiver file which will be fed into the AP system on a daily basis. Further, the AP system will create a payment schedule based on the terms of settlement. It is also known as File Feeds. ERS is used only for Purchase Order backed supplies. ERS Continued

94. Payment methods In this topic, you will learn to: Explain the different payment types

96. Cash Cash is paid when any purchases are made. These are done when the value of the purchases is very nominal. These are usually associated with the day to day office expenses like stationery, recreation expenses, conveyance and other miscellaneous expenditure.

98. Wire is transfer of amount due directly to the supplier’s bank…an electronic transfer of funds to the vendor concerned. It is a faster mode of payment. Instructions are sent to the bank to wire a particular amount to a vendor. This mode of payment is typically used for international suppliers and can be paid in Foreign Currency or USD. Wire payments are ‘same day’ payments that are costly to both GE and their suppliers. These are reserved for International banking transactions. Wires

100. A check drawn by one bank against funds deposited into its account at another bank, authorizing the second bank to make payment to the individual named in the draft. This mode of payment helps to provide prompt payments in foreign currencies. These can be issued either is USD or in Foreign Currency. This allows payments to be made to foreign countries with the convenience of drawing funds from a foreign bank. A draft can clear much more quickly than a check drawn. Draft Statutory requirements with respect to drafts should be adhered to.

102. Payment Run process In this topic, you will learn to: Explain the payment run process, discuss the remedies available when a check returns & identify when a stop payment can be made

110. Hey! I won a lottery ticket for $50,000 Yo! I’m rich. I’ll deposit the check right away in the bank! Oh!My, I cannot find the check

111. WAIT! Don’t panic… No one can cash the check - There’s a solution! MAKE A STOP PAYMENT!!! I lost the check you gave me for winning the lottery

112. The Lottery agency informed the bank and made a stop pay! The check cannot be used by anyone now!!! Stop pay is a request to the bank not to honor a particular check! Oh!oh! I’ll make a stop payment right away. Please confirm the check number Since the check has been lost and stop paid, we’ll reissue another check in your favor!!!

114. Third Party Payments In this topic, you will learn to: Describe the circumstances under which a third party gets paid

120. Due Diligence In this topic, you will learn to: Describe the Due Diligence process

121. This is a term used to define the efforts made by companies to reunite unclaimed property with the rightful owner. The first step in due diligence is to identify what property is considered legally unclaimed. Accounts Payable generally considers a vendor payment to be legally unclaimed when a check has remained outstanding for more than six months beyond the issuance date. Due Diligence

122. Once property items have been identified as unclaimed, research is performed to ensure that the property items are valid. Examples of invalid items could include duplicate payments made to vendors or customer payments incorrectly accounted for. Validation of unclaimed property Escheatment - The process of turning over unclaimed or abandoned property to a state authority.

123. Timing of Due Diligence process GE has an internal policy of performing the due diligence process twice prior to the escheatment of funds to state governments. The AP initial due diligence process should be completed when a vendor payment has been outstanding for more than six months beyond the issuance date. The final due diligence process should be completed pursuant to state regulations. Each state generally requires the final due diligence process to be performed within 30 to 120 days prior to the escheatment of funds. This allows the owner sufficient time to claim the funds prior to escheatment.

124. Accounting Entries In this topic, you will learn to: Write the journal entries involved in AP

125. Goods received GR/IR is the short form for Goods received/Inventory received. (a) When Goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $100 Dr. GR/IR (Payables clearing) a/c 100.00 Cr. A/P Vendors (vendors) a/c 100.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 100.00 Cr. Bank a/c 100.00 Receiving applied Invoice paid When goods worth $100 is received and invoice processed for the same. (a) $100.00 Inventory a/c Dr. Cr. (b) $100.00 (a) $100.00 GR/ IR a/c Dr. Cr. (c) $100.00 (b) $100.00 A/P vendors a/c Dr. Cr. (c) $100.00 Bank a/c Dr. Cr.

127. When receiving is made for $100 and invoice is processed for $105. Cost change of $5. Goods received (a) When goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $105 taking into account the cost change Dr. GR/IR (Payables clearing) a/c 105.00 Cr. A/P Vendors (vendors) a/c 105.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 105.00 Cr. Bank a/c 105.00 Receiving applied Invoice paid (d) When an entry for cost change is passed Dr. Inventory (Asset clearing) a/c 5.00 Cr. GR/IR (Payables Clearing) a/c 5.00 Adjustment made (a) $100.00 (d) $5.00 Inventory a/c Dr. Cr. (b) $105.00 (a) $100.00 (d) $5.00 GR/ IR a/c Dr. Cr. (c) $105.00 (b) $105.00 A/P USD$ vendors a/c Dr. Cr. (c) $105.00 Bank a/c Dr. Cr.

128. When receiving is made for $100 and invoice is processed for $95. Cost change of -$5. Goods received (a) When goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $95 taking into account the cost change Dr. GR/IR (Payables clearing) a/c 95.00 Cr. A/P Vendors (vendors) a/c 95.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 95.00 Cr. Bank a/c 95.00 Receiving applied Invoice paid (d) When an entry for cost change is passed Dr. GR/IR (Payables Clearing) a/c 5.00 Cr. Inventory (Asset clearing) a/c 5.00 Adjustment made (a) $100.00 (d) $5.00 Inventory a/c Dr. Cr. (b) $95.00 (d) $5.00 (a) $100.00 GR/ IR a/c Dr. Cr. (c) $95.00 (b) $95.00 A/P USD$ vendors a/c Dr. Cr. (c) $95.00 Bank a/c Dr. Cr.

131. In the Canadian books, when receiving is made for USD$100.00 and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.50) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/Loss a/c 50.00(CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 150.00 (CAD) Cr. A/P CAN $ vendors a/c 150.00 (CAD) (c) When Payment is done Dr. A/P CAN $ vendors a/c 150.00 Cr. Bank a/c 150.00 (d) System passes an Entry for the Foreign exchange variance Dr. Fx gain/Loss a/c 50.00 Cr. GR/IR a/c 50.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $150.00 (a) $100.00 (d) $50.00 GR/ IR a/c Dr. Cr. (c) $150.00 (b) $150.00 A/P CAD$ vendors a/c Dr. Cr. (c) $150.00 Bank a/c Dr. Cr. (d) $50.00 (a) $50.00 Forex Gain/Loss a/c Dr. Cr.

132. In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.52) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/loss a/c 50.00 (CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 152.00 (CAD) Cr. A/P CAN $ vendors a/c 152.00 (CAD) (c) When Payment is done Dr.A/P CAN $ vendors a/c152.00 (CAD) Cr. Bank a/c 152.00 (CAD) (d) System passes an Entry for the Foreign exchange variance Dr Fx gain/Loss a/c 52.00 Cr. GR/IR a/c 52.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $152.00 (a) $100.00 (d) $52.00 GR/ IR a/c Dr. Cr. (c) $152.00 (b) $152.00 A/P CAD$ vendors a/c Dr. Cr. (c) $150.00 Bank a/c Dr. Cr. (d) $52.00 (a) $50.00 Forex Gain/Loss a/c Dr. Cr.

133. In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.48) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/Loss a/c 50.00 (CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 148.00 (CAD) Cr. A/P CAN $ vendors a/c 148.00 (CAD) (c) When Payment is done Dr. A/P CAN $ vendors a/c 148.00(CAD) Cr. Bank a/c 148.00 (CAD) (d) System passes an Entry for the Foreign exchange variance Dr. Fx gain/Loss a/c 48.00 Cr. GR/IR a/c 48.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $148.00 (a) $100.00 (d) $48.00 GR/ IR a/c Dr. Cr. (c) $148.00 (b) $148.00 A/P CAD$ vendors a/c Dr. Cr. (c) $148.00 Bank a/c Dr. Cr. (d) 48.00 (a) 50.00 Forex Gain/Loss a/c Dr. Cr.

134. AP JEs At the time of Receivings Purchases A/c Dr To Receipt Control A/c At the time of Invoice – PO Matching Receipt Control A/c Dr To AP Liability A/c At the time of Payment AP Liability A/c Dr To Cash/Bank A/c Opposite Process For Material Returns* ( * Depends on Case To Case Basis )

135. Material in Transit Material in Transit A/c Dr To Accrued Liability A/c Material Recd. but Invoice Not Recd. Receipt Control A/c Dr To Accrued Liability A/c Accrual for Expenses and Charges Like Rent etc.. (sometimes estimates) Expense A/c Dr To Provision for Expenses A/c AP Accrual JEs Entries To Be Passed At Month End To Be Reversed At Beginning of Next Month

136. Purchase Returns In this topic, you will learn to: Define purchase returns and explain how it is handled

140. What is a Debit Memo? Vendor Compaq Ltd. raises an invoice on GE Aircraft Engines for $5,230 and the amount was paid. $230 is not to be paid as they amount to freight expenses. Who raises a Debit Memo? On whose name? A debit memo is raised by GE Aircraft Engines (GEAE) on the vendor’s name, Compaq Ltd. Origin of debit memos are duplicate payments, payment to wrong vendor, extra payment, services cancelled etc.. Debit Memo is a note/memo indicating the amount owed by a company or a person. These actually originate from uncollected credits.

141. What is a Credit Memo? A note/memo indicating the amount owed to a company or a person. A credit memo is used to reduce the accounts receivable on the books of the vendor. Origin of credit memos are underpayments, payment to a wrong vendor, etc.. Dell Inc raises an invoice on GE Information Technology Solutions (ITS) for $10,519 which includes freight of $219. Due to an invoice error, only $9,519 was paid. Who raises a Credit Memo? On whose name? A credit memo is raised by GE Information Technology Solutions (ITS) on the vendor’s name, Dell Inc

142. Aged Debit memos Uncollected debit memos begin to age. Thus, they require intense collection methods, including research, calls to the vendor, etc.. When items begin to age, the responsibility of collections is turned to collection agencies. The collection agencies assist Accounts Payable with collections for a fee. The longer a debit ages, the less likelihood of it being collected, either by the Accounts Payable department or by the collection agency. In the event of all measures failing, the amounts due are written off after obtaining the necessary approvals from the buyer. Vigorously follow up to collect - Do not allow items to age!

143. Hold In this topic, you will learn to: Define hold and explain the circumstances under which hold is placed

147. Vendor Reconciliations In this topic, you will learn to: Explain the High level Reconciliation process

148. Vendor Statements are received on a regular basis from the Vendors. These are then compared with the General Ledger balance of that particular vendor. The process of identifying and classifying the entries of differences between the Vendor statements and the G/L is referred to as a Vendor Reconciliations. The purpose of the reconciliation is to rectify or resolve the open items for accurate tallying of balances. Vendor Reconciliations

149. (1) Description/purpose of the balance sheet account must be documented (2) Total of items listed equals ending balance in the general ledger account (3) Items supported by sources independent of the general ledger being reconciled (4) Account reconciliation and supporting documentation are accessible (5) Open items resolved in the quarter identified (6) Account Reconciliation is reviewed by Peer/Manager and indicated by signature and date (7) Account Reconciliation is completed timely. Corporate Criteria

150. Reconciliation Process Download Vendor account balance from G/L and receive the Vendor Statement Identify if there are any variances between the G/L and the Vendor statement No Variance Variance Compile Reconciliation Templates Reconciliation sheet Identify the reason for the Variances Identify action plan, timing & Responsibility

151. Customer Service In this topic, you will learn to: Express the importance of Customer Service

152. Accounts Payable process does not stop with just processing invoices. Vendors and buyers contact the AP Department with many queries. And it is part of the team’s work to ensure that the queries and concerns are addressed. Respond promptly & accurately to queries - Become a Quality Customer Service Personnel! Customer Service - Part of the game

155. Controllership in AP In this topic, you will learn to: Explain Controllership in AP and identify a few red flags

156. Hence, payment if made, will reach the wrong vendor!!! Accounts Payable is a liability to a company and such liability should be rightly accounted for. Even small errors are big blunders in Accounts Payable. For Example: Coding of a credit purchase of goods of $5,000 from XYZ Inc. to ABC Inc. Correct Journal Entry: Purchases A/c Dr. $5,000 XYZ Inc. A/c Cr. $5,000 Thus, liability is wrongly accounted! Wrong Journal Entry: Purchases A/c Dr.$5,000 ABC Inc. A/c Cr. $5,000

163. 6 Duplicate Payments GL Coding Accruals Forex Accounting Biz Process 6  Process Segregation of Duties Vendor Verification Approval / Matching Economic, Risk Based Decisions Discount / Finance Charges Paid on Time Expedited Transactions Assets Safeguard Disputes Resolution Vendor Recon Control Acct. Recon

166. Requirement for materials / services arises Create agreement or communicate Purchase Order to supplier Vendor ships materials Approve invoice for payment Payables department verifies invoice and makes payment Requisition sent to Sourcing Department The process – Put controls Vendor sends order and invoice PO Non PO Reconcile Vendor Accounts & GL Accounts $ = $

172. Risks Vs. Controls Potential Risk Control Multiple Vendor Ids Vendor Purging Policy Blanket POs Tracking Process Evaluate Possibility of Standard PO Non PO Invoices Approval Matrix and Validity Name of the Approver with specimen Money Limits Pay Current Charges Material Returns Return To Vendor (RTV) Process Claim / Tracking # Vendor Account Dr. Balance Recover / Adjust Payments Contd …..

173. Potential Risk Control Duplicate Payments Duplicate Audit Process Price / Qty. / Currency Variance Limits Absolute $ and %age Limit Track Variance Account value All Invoices & Credit Notes Timely Vendor Reconciliation Accounted for Balance Confirmation Reconciliation Open Items I Identify owners & timelines (Vendor / AP / Sourcing / GL Team) Escalation Matrix Advance Payments Vendor Reconciliation Force Pay etc.. Approval Matrix Contd ….. Risks Vs. Controls

174. Potential Risk Control Processing Accuracy Q C Process Knowledge Update SOPs Process Refresher Course Disputed Invoices Root Cause Analysis Initiate Process Improvements Risks Vs. Controls Not An Exhaustive List …….. Need Continuous Watch

177. Identify the Red flags...

183. AP does not process... In this topic, you will learn to: Explain the cases which Accounts Payable does not process

184. AP does not process… A Statement of an Invoice is a Proforma Invoice which lets the purchaser know of his liability. It is an unofficial document that serves as a notice to the buyer. It states the amounts outstanding, amounts paid and other charges, if any incurred as on a particular date. Accounts Payable is not supposed to pay against the statement of an invoice Keep your eye - Do not pay or process statements of invoices!

188. Sarbanes Oxley In this topic, you will learn to: Define SOX404

191. Best practice from GE Businesses In this topic, you will learn to: Identify some E-tools used by different GE Businesses

192. Some E-Tools in Sourcing

193. Some E-Tools in Sourcing

194. E-Bid Tools: Example, Sourcebid, Noosh, Procuri.Com. Reverse auctions get the best pricing, terms, etc. that the market will bear. E-Buy Tools: E-Source Paperless purchasing via web-requisitioning system. Internal ordering via electronic catalogs and requisitions. Continual enhancements to Oracle system. E-Pay Tools: Purchasing Card (P-Card), Electronic Funds transfer (EFT) End users purchase low-value goods directly, eradicating non value added work connected with PO’s for Sourcing and Accounts Payable. GEIH Sourcing - Digitization Initiatives

200. Dictionary Double Click to view the AP Dictionary