17 Nov Proper Accounts Payable Procedures
Proper Accounts Payable Procedures
The proper procedures are to enter a bill then pay the bill.
Occasionally data entry errors occur and the bill is entered then subsequently a check is entered to pay the vendor. The result of the incorrect procedure is that the expense has been recorded twice and the Accounts Payable balance has not been reduced for the amounts paid. Assuming that financial statements have not been issued and the tax returns have not been completed (i.e. only this fiscal year of activity) a bill that was entered to show an amount due to a vendor, the write check function was used for paying the vendor, and then the bank reconciliation procedures have been completed, the best solution is to change the code on the check to Accounts Payable.
If the situation affects a prior period, the error needs to be corrected in the current period. A journal entry will be created using a current date for each vendor individually. The debit will be Accounts Payable with the vendor name, the credit will be the expense account incorrectly entered on the check.
In either case, follow the procedures for applying a vendor credit i.e. check or journal entry) against the bills.