Unit 4

Accounts Payable
and Receivable
Unit 4 Overview
Every business in Pettisville is involved in buying
and selling of goods and/or services.
All businesses except Pettisville Post Office
prepare invoices – either item invoices or service
invoices.
Businesses that sell merchandise must also
prepare goods for shipment through Pettisville
Post Office or 18 Wheeler Truck Lines
Unit 4 Timing
It is very important that you understand the
process of buying and selling before the
simulation begins.
You will learn how to prepare a purchase order
(Lesson 4.1) and how to prepare an item invoice
(Lesson 4.2) before the simulation begins.
The service invoices is similar to the item invoice
except that there are no shipping charges.
Unit 4 Business Forms
• Item invoices
• Office supplies requisitions
• Purchase orders
• Service invoices
Preparing Purchase Orders
4-1
4.1 Managing Tips
• Be sure you understand the difference between
wholesalers and retailers.
• The Denim Maker and Mean Jeans
Manufacturing Co. are wholesalers and,
therefore, do not charge sales tax on goods for
resale.
4.1 Business Ethics
One ethical problem that occurs in some
businesses has to do with employees who make
purchases for their companies.
Suppliers sometimes offer “kick-backs” or free
gifts to entice employees to buy from them.
Many businesses have written policies stating
that employees may not receive gifts or money
for any purchases made for the company.
4.1 Business Ethics
One of the biggest ethical dilemmas employers have
is pilferage, the shrinkage of inventory due to
employee theft.
◦ This is sometimes a bigger problem that shoplifting.
◦ Managers can quickly spot pilferage by taking
inventory.
◦ For example, a fast food restaurant that sells 1,000
hamburgers on a given day but used 1,200 patties in
the process probably lost the remaining 200 hamburger
patties to pilferage.
◦ The same manager will control employee theft from the
cash register by counting the money in the cash drawer
every hour.
4.1 Managing Tips
• In this simulation, the term supplier is always
used to describe businesses that sell goods to
together businesses.
• The term vendor is another name for supplier
4.1 Managing Tips
• Purchase orders should not be mailed for cash
and carry purchases of supplies from Taylor
Office Supplies.
• Managers should go to the Taylor Office Supplies
and carry the purchase order and their
checkbooks with them to make the transaction
in person.
4.1 Managing Tips
Cash flow is extremely important in business.
Some companies offer a discount to customers
who pay invoices quickly.
For example, 2/10 n/30 listed on an invoice
means that the customer gets a 2% discount for
paying the invoice within 10 days of the invoice
date.
Payments made after the discounted period (day
11 through day 30) must be the net amount.
Using Item Invoices
4-2
4.2 Managing Tips
• There are many steps involved in processing a
purchase order. It is important to complete all
steps accordingly.
• Do not assume that the incoming purchase order
is correct and fail to verify the amounts on the
purchase order.
• Do not forget to send an invoice for goods and
not ship the goods or vice versa.
4.2 Managing Tips
• Managers must arrange to ship goods via 18
Wheeler Truck Lines or the post office before the
customer is invoiced. This involves preparing a
shipment form.
• If the shipment is via 18 Wheeler Truck Lines,
the manager will also prepare a bill of lading.
Likewise, do not pay an item invoice until you
have a shipment form in hand.
4.2 Managing Tips
• Understand the importance of a
remittance slip. It is prepared by the
customer and returned with the
customer’s payment.
▫ When paying an electronic invoice, the only
part of the remittance slip that must be
completed is the AMOUNT ENCLOSED box.
▫ When paying a manual invoice, the entire
remittance slip must be completed by the
customer
4.2 Managing Tip
• The following businesses prepare item invoices
▫ Buckeye Equipment
▫ The clothes Closet
▫ The Denim Maker
▫ Hollywood and Vine Videos
▫ Taylor Office Supplies
Unit 4 Career Paths
• The skills and concepts taught in Unit 4 are
essential for success in the following careers
▫ Accounts payable clerk
▫ Auditing clerk
▫ Bookkeeper
▫ Buyer
▫ Cashier
▫ Salesperson
4.2 Managing Tip
• It is extremely important to place a copy of the
item invoice in the Pending File until payment is
received.
• When the business receives the payment, the
invoice should be marked PAID and then placed
in the Office File.
4.2 Managing Tip
• The following companies prepare invoices that
are unique to their businesses.
▫ 18 Wheeler Truck Lines – freight bills
▫ The Towne Crier – display ad invoices
▫ United Communications – telephone bills
Using Service Invoices
4.3
4.3 Service Invoices
• As a manager, if you are caught up you will plan an exotic trip
at Passports-2-Go. Passports to go will get travel rates online.
Managers may browse the following sites
▫ www.cheaptickets.com
▫ www.expedia.com
▫ www.jetvacations.com
▫ www.lodging.com
▫ www.orbitz.com
▫ www.priceline.com
▫ www.travel.com
▫ www.travelocity.com
▫ www.uniglobe.com
4.3 Service Invoices
• As a manager, if you are caught up you will
request services at Creative Advertising Agency
or Popular Designs.

• Two Pettisville businesses charge commissions

on service invoices. Creative Advertising charges
a rate of 15% and Noveau Investment Company
charges a rate of ½%
4.3 Service Invoices
• The following businesses prepare service
invoices
▫ Buckeye Equipment
▫ Creative Advertising Agency
▫ Lee Community Center
▫ Noveau Investment Company
▫ Passports-2-Go
▫ Pettisville bank
▫ Popular Designs
▫ Taylor Office Supplies
4.3 Service Invoices
• When you are referred to a page in the
student Reference Book, be sure to follow
the correct automatic or manual
procedures followed by the correct
numerical steps.
4.3 Service Invoices
• Understand the importance of a remittance slip. It is
prepared by the customer and returned with the
customer’s payment.

▫ When paying an electronic invoice, the only part

of the remittance slip that must be completed is
the AMOUNT ENCLOSED box.

▫ When paying a manual invoice, the entire

remittance slip must be completed by the
customer