Definition of 'Accounts Payable - AP'

An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities. Accounts payable are often referred to as "payables". Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

Investopedia explains 'Accounts Payable - AP'

Accounts payable are debts that must be paid off within a given period of time in order to avoid default. For example, at the corporate level, AP refers to short-term debt payments to suppliers and banks. Payables are not limited to corporations. At the household level, people are also subject to bill payment for goods or services provided to them by creditors. For example, the phone company, the gas company and the cable company are types of creditors. Each one of these creditors provide a service first and then bills the customer after the fact. The payable is essentially a short-term IOU from a customer to the creditor. Each demands payment for goods or services rendered and must be paid accordingly. If people or companies don't pay their bills, they are considered to be in default.
"Accounts payable" (AP) is a term that refers to the money that a person or business must pay to its creditors within a certain period of time. It is the unpaid invoices, bills or statements for goods or services rendered by outside contractors, vendors or suppliers. These debts often must be paid either partially or in full each month. When someone pays his or her monthly electricity, telephone, cable television and Internet service provider bills, for example, he or she is paying off his or her accounts payable obligations. The term "accountspayable" also is the term that is used to refer to the unit within an organization's accounting department that manages these payments. Accounting Processes The accounts payable unit in an organization often oversees a variety of tasks. These might include authorizing purchase orders, collecting credit card receipts, organizing account withdrawals, keeping the general ledger and auditing expense reports. Other accounting transactions that an organization's accounting department might manage include accounts receivable (AR), which focuses on the billing of customers, and the organization's payroll, which focuses on paying employees.
Accounts Payables is nothing but a Liability which has to be paid by the company for the goods that they have purchased or services that they have availed from a Vendor. The Firm is Accountable or responsible to pay for the goods purchased or services that they have availed.

It is shown on the Liability side of the Balance sheet. Balance sheet is for evaluating the Financial position of the Business and whatever is yet to be paid or outstanding is shown on the Liability side of the Balance sheet. Accounts payable process means by checking the payable invoices (purchase) and then send it to payment and lastly settlement of payment.

Accounts Payable process works as per your daily life... How? When you go for shopping, you will purchase goods by giving cash. Giving cash is nothing but you are making payment for what you have subscribed. But when samething happens in industries, they do huge business with several vendors and the business is ongoing process with the vendor hence companies will tied up with vendor on purchasing terms where they will make payments based on order. So before making payment, Accounts Payables dept need to review the billing details of the vendor and eradicate the duplicate payment to the vendor End to end of accounts payable includes the various stages involved in making the payment of an invoice received from a vendor . The AP activities starts with the receipt of the invoice from the vendor and ends when it gets paid .The various stages in an AP process are listed below (a) Receipt of invoice (b) Scanning the invoice and uploading it in workflow (c) Processing the invoice in the system ( ERP) (d) The posting going through QC - quality check. (e) Resolving a parked invoice. (f) Payment proposal - report of invoices falling due on the currect date. (g) Payment run - here the invoice ultimately gets paid

A/R (Accounts Receivable) and A/P (Accounts Payable) are used by businesses to record sales for which they are not immediately paid, or to record bills that they have received, but might not pay until later. These types of accounts are used primarily when you've got a lot of bills and receipts flowing in and out, and don't want to lose track of them just because you don't pay/get paid right away. For most home users, A/R and A/P will add so much complexity that they are not worth the effort.

Accounts Receivable
Let's assume that instead of requiring customers to pay instantly, in cash, you issue them an invoice, and give them 30 days to pay the bills. (After 30 days, we start charging interest and sending out harassing letters :-)). When we make a sale, the two

accounts affected are Sales (an income account) and Accounts Receivable. Accounts Receivable is an asset, but it's not "liquid," as you can't readily sell it, and it's certainly not cash. When the customer pays the bill, you transfer the amount from A/R to Cash. This is done in two steps because you have decided to do your accounting on an accrual basis and not on a cash basis. This is because most of your transactions are not solely based on cash changing hands, but rather based on establishing obligations. In more sophisticated operations, there may be a much more complex sequence of documents generated and tracked:

A customer sends in a Purchase Order, which authorizes a purchase. A Work Order to schedule production of whatever the customer is buying. A Shipping Notice is issued, to ship to goods to the customer. Once shipped, an Invoice is issued, representing the request to pay.

Sales are reported as soon as they occur. Unfortunately, you may wind up selling some product to no-good shady operators that you didn't know were shady, and thus may get stuck with some "bad debts." In order to determine which parts of Accounts Receivable appear to be most at risk, it is typical to arrange A/R based on the "ages" of the debts, commonly segmenting it into several aging periods, of payments outstanding 0-30 days, those that outstanding 31-60 days, 61-90 days, and then those that are way overdue. At some point, it may become clear that a customer is never going to pay what they owe, and we have to write it off as a Bad Debt. At that point, it is typical to record an entry thus: Table 2. Bad Debt Expense Example
Account Bad Debt Expense DR $10,000 CR

Accounts Receivable

$10,000

You could have reduced Sales Income instead, but companies tend to prefer to specifically track the amount that they're losing to bad customers. Warning: Advanced Accounting Concept. Bad Debt is an example of a "contraaccount." That doesn't refer to amounts paid to Nicaraguan rebels, but rather the

notion that the account is an income account that is expected to hold a balance opposite to what is normally expected, to be counteract the balance in another income account. Accumulated Depreciation, used to diminish the value of an asset over time, is another example of a contra-account.

Definition of 'Accounts Receivable - AR'

Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year. On a public company's balance sheet, accounts receivable is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts

Investopedia explains 'Accounts Receivable - AR'

If a company has receivables, this means it has made a sale but has yet to collect the money from the purchaser. Most companies operate by allowing some portion of their sales to be on credit. These type of sales are usually made to frequent or special customers who are invoiced periodically, and allows them to avoid the hassle of physically making payments as each transaction occurs. In other words, this is when a customer gives a company an IOU for goods or services already received or rendered. Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their employers in the form of a monthly or bi-weekly paycheck. They are legally owed this money for services (work) already provided. When a company owes debts to its suppliers or other parties, these are known as accounts payable.
By outsourcing accounts receivable processing, business managers are able to focus on core business tasks while simultaneously trimming costs of finance and accounting, and boosting the companys productivity and profitability. Outsourcing your accounts receivable financing management tasks and get benefits:

Increased Cash Flow Fewer Delinquencies Reduced Operating Costs Improved Customer Services Improved Management Control Reduced Outstanding Daily Sales

Bank Reconciliation (BR) Bank reconciliation is an integral part of your business bookkeeping as it helps you keep track of your current financial position. The day to day preparation of it however, can be a time consuming process that is prone to a myriad of errors

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Depending on the complexity of your business, most likely, you may not have the requisite time or resources to allot solely to ensuring accuracy of your reconciliations, while running your business. With the help of our competent finance and accounting analysts however, you can rest easy knowing that experienced people making sure that all your information are accurate. With our bank reconciliation services, we can assist you with partial or full reconciliation including Reconciliation of bank records with internal records and Reconciliation of credit billings with internal records Special features of Credit Card and Bank Reconciliation Services :

Competitive pricing High data security Responsive customer support Efficiently documented, mature programs with on-line knowledge base A wide variety of reports reflecting debit and credit activity and exceptions that have occurred on the account

Accounts Receivable Age Analysis

The Accounts Receivable Age Analysis Printout, also known as the Debtors Book is divided in categories for current, 30 days, 60 days, 90 days, 120 days, 150 days and 180 days and over due that are produced in Modern Accounting Systems. The printout is done in the order of the Chart of Accounts for the Accounts Receivable and/or Debtors Book. The option to include Zero Balances outstanding or to specifically leave it out is also possible in the printout features. [edit]Bookkeeping On a company's balance sheet, accounts receivable is the money owed to that company by entities outside of the company. The receivables owed by the company's customers are called trade receivables. Account receivables are classified as current assets assuming that they are due within one year. To record a journal entry for a sale on account, one must debita receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is usually a debit. Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use accounting softwareon a computer to perform this task. Companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account. The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways, either (1) by reviewing each individual debt and deciding whether it is doubtful (a specific provision); or (2) by providing for a fixed percentage (e.g. 2%) of total debtors (a general provision). The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement.

The second method is the direct write-off method. It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective accounts receivable in the sales ledger. The two methods are not mutually exclusive, and some businesses will have a provision for doubtful debts, writing off specific debts that they know to be bad (for example, if the debtor has gone into liquidation.) A Bank reconciliation is a process that explains the difference between the bank balance shown in an organisation's bank statement, as supplied by the bank, and the corresponding amount shown in the organisation's own accounting records at a particular point in time. Such differences may occur, for example, because a cheque issued by the organisation has not been presented to the bank, a banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organisation's books either the bank or the organisation itself has made an error

It may be easy to reconcile the difference by looking at very recent transactions in either the bank statement or the organisation's own accounting records (cash book) and seeing if some combination of them tallies with the difference to be explained.

Tax Deduction Account Number

Tax Deduction Account Number or TAN is a unique identification number for person deducting the tax. The person who is liable to deduct the Tax should obtain a TAN before deducting such Tax. TAN should applied through Form No 49B (prescribed under Income Tax Law). Such form can be submitted online at website. OR can also be submitted at Tax Information Network Facilitation Center (TIN-FC). These [1] centers are established by NSDL (which is an appointed intermediary by the Government) across India. TAN Application should accompany a 'proof of identity' and a 'proof of address' (photocopies) of the deductor. In case, the application is made online, these documents need to be sent over mail (post/courier) to NSDL - TAN Application division. Once NSDL receives the TAN application along with said documents (either through TIN FC / Online), the details are verified and then sent to Income Tax Department. Once approved, Income Tax Department will allocate a unique number, and indicate the applicant through NSDL. TAN will be a 10-character alphanumeric string composed of four alphabetic, five numeric, then one alphabetic character. E.g.: "BLRR02933A". The first three characters are an Income Tax Region Code (BLR => Bangalore) and the fourth digit is the first character of the deductor name (R => is denote to the deductee.that which is individual or Company if individuality denote =P and Company Denote =C Remaining characters form a unique combination to get identified at Income Tax Department. [edit]Deductor Under the process of TDS, Deductor is a person/company who is liable to deduct the Tax at source, from the payment being made to the party. Deductor is also termed as Employer in cases where the payments [2] are under Salaries.

[edit]Deductee Deductee is the person, from whom the tax is being deducted or accrued for deduction. Depending on the nature of the deduction being made, deductees and respective submission forms are categorized to 4 types: 1. Salaries: In case of salaries, the deductee is termed as an Employee. All the information of deductions and payments in this category should be submitted in Form 24Q to the government. 2. Non-Salaries - Resident: In case of non-salaries and the payment is made to a resident in India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 26Q to the government. 3. Non-Salaries Nonresident: In case of non-salaries and the payment is made to a non-resident of India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 27Q to the government. [edit]TDS

Certificates

A tax deductor is also required to issue TDS certificate to the deductee within specified timed under section 203 of the I T Act. The certification from the deductor, for the deduction and payment of the [3] respective TDS amount to the bank, issued to the deductee is a TDS certificate. The deductee should produce the details of this certificate, during the regular assessment of income tax, to adjust the amount of TDS against the Tax payable by the Deductee [assessee]. [edit]Types

of TDS certificates

Salaries - Form 16: In case of Salaries, the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details. This refers to the details submitted over Form 24Q. Non-salaries - Form 16A: In case of Non-Salaries, the certificate should be issued in FORM 16A containing the Tax deducted & Paid details. Separate certificates should be prepared for each Section [nature of payment]. This refers to the details submitted over Form 26Q and 27Q.

Who shall deduct tax at source?

Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax. However in case of payments made under sec. 194A, 194C, 194H, 194I and 194J in respect of individual and HUF, only if the turnover or professional receipt exceeds sum of Rs. 40 lakh or Rs. 10 lakh respectively (the limits will be Rs.60 Lakh or Rs. 15 Lakh respectively w.e.f. 01.07.2010) in previous year, he is required to deduct tax at source. These persons are mainly:

- Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer. - DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such. - In the case of "interest on securities" other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof. Such person is called Deductor while the person from whom the tax is deducted is called Deductee. Tax must be deducted at the time of payment in cash or cheque or credit to the payee's account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee's account and TDS must be made at the time of such credit.
A value added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.