Accounts payable and receivable introductions

1. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
ACCOUNTS PAYABLE AND RECEIVABLE
INTRODUCTIONS
A.VALLI
ACOUNTS DEPARTMENT

2. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Accounts Payable Introduction
Accounts Payable is nothing but a Money owed by a company to its
creditors.
When a company orders and receives goods or services in advance
of paying for them, we say that the company is purchasing the
goods on credit.
The supplier or vendor of the goods/services on credit is also
referred to as a creditor.
If the company receiving the goods does not sign a promissory
note, the vendor's bill or invoice will be recorded by the
company in its liability account as Accounts Payable or Trade
Payables.
Accounts payable is a short term liability and to be paid within 3
months or less than a year.

3. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Accounts Payable as Short term Liability
• Accounts that are owed to suppliers who are referred as
trade creditors as distinguished from accrued interest, rent,
salaries, taxes, and other such accounts.
• Accounts payable are shown under current (short-term)
liabilities in the balance sheet.
• Lenders and investors examine the relationship of these
accounts to the firm's purchases in order to judge the
soundness of its day to day financial management.

4. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
The Accounts payable needs to be reviewed with the following
documents:
• Purchase orders issued by the company
• Receiving reports issued by the company
• Invoices from the company's vendors
• Contracts and other agreements
This means that before a vendor's invoice is entered into the
accounting records and scheduled for payment, the invoice must
reflect:
• what the company had ordered
• what the company has received
• the proper unit costs, calculations, totals, terms, etc.
The accuracy and completeness of a company's financial statements
are dependent on the accounts payable process.
ACCOUNTS PAYABLE PROCESS

5. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Contn..
A well-run accounts payable process will include:
• The timely processing of accurate and legitimate vendor invoices,
• Accurate recording in the appropriate general ledger accounts, and
• The accrual of obligations and expenses that have not yet been
completely processed.
The efficiency and effectiveness of the accounts payable process will
also affect the company's cash position, credit rating, and relationships
with its suppliers.
To safeguard a company's cash and other assets, the accounts payable
process should have internal controls. A few reasons for internal
controls are to:
• Prevent paying a fraudulent invoice
• Prevent paying an inaccurate invoice
• Prevent paying a vendor invoice twice
• Be certain that all vendor invoices are accounted for

6. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Accounts payable Three-way match
• The accounts payable process often uses a technique known as the
three-way match to assure that only valid and accurate vendor invoices
are recorded and paid. The three-way match involves comparing the
following information:
• The description, quantity, cost and terms on the company's purchase order.
• The description and quantity of goods shown on the receiving report.
• The description, quantity, cost, terms, and match on the vendor invoice.
Only when the details in the three documents are in agreement will a vendor's
invoice be entered into the Accounts Payable account and scheduled for
payment.

7. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Accounts Receivable is nothing but a Money owed to a company by its
debtors.
Accounts receivable is the money that a company has a right to receive because it
had provided customers with goods and/or services.
For example, a service provider provides their services to their customer and
the customer is allowed to pay in 30 days. From the date of completion
of services and invoice, until the company receives the money, the
company will have an account receivable. Accounts receivables are also
known as trade receivables.
Companies who sell on credit are unlikely to have liens on their customers'
property. Hence, there is a risk that the full amount of their accounts
receivable might not be collected. This means that companies need to
cautious when granting credit and establishing an account receivable. If
there is uncertainty of a potential (or existing) customer's credit
worthiness, it is wise for the company to require the customer to pay in
advance before delivering goods or services
Account Receivable Introduction

8. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
It is also important for a company to monitor its accounts receivable
and to immediately follow up with any customer who has not
paid as agreed. An aging of accounts receivable is a tool that will
help and it is readily available with most accounting software. A
general rule is that the older a receivable gets, the less likely it will
be collected in full.
Accounts receivable are reported as a current asset on a company's
balance sheet. Good accounting requires that an estimate be
made for the amount that is unlikely to be collected. That
estimate is reported as a credit balance in a related receivable
account such as Allowance for Doubtful Accounts. Any
adjustments to the Allowance balance will also be recorded in the
income statement account Uncollectible Accounts Expense.
Account Receivable

9. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Credit Policies
• To increase the likelihood of selling to customers who will pay
on time, companies develop control procedures and maintain a
credit department.
The credit department examines the following details:
• Examines the financial resources and debts of the credit
applicant
• Asks for personal reference
• Get credit rating from credit bureaus
• Determine the extent to which the company can grant credit

10. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
contd…

11. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
UNCOLLECTIBLE ACCOUNTS
• Some receivables will never be collected and must be written off as
uncollectible.
• The uncollectible expense is place on the income statement as a
selling expense and also it will decrease the profit of the company
• For example if a AR period is provided as 30 days (1 Month), and
we shall can receive payment within 3 months. Sometimes it may
extend upto 6 months to one year. If it goes beyond one year, it
may be considered as bad debts and to be written off.

12. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Difference between AP & AR
• Accounts payable are amounts a company owes because it
purchased goods or services on credit from a supplier or vendor.
Accounts receivable are amounts a company has a right to collect
because it sold goods or services on credit to a customer.
• Accounts payable are liabilities. Accounts receivable are assets.
• Let us assume that Company X sells merchandise to Company Y
on credit. (Perhaps the invoice states that the amount is due in 30
days.) Company X will record a sale and will also record an
account receivable. Company Y will record the purchase (perhaps
as inventory) and will also record an account payable. Company
X has a sale and a receivable, Company Y has a purchase and a
payable.

13. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Contn..

14. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com