4 Administer, Monitor and Control General and Subsidiary Ledgers

Admas University
Account and Budget Support Level III

Based on August 2012, Version 2
Occupational Standards (OS) and
Curriculum
Unit of competencies: Administer, Monitor and Control General
and Subsidiary Ledgers
Module Title: Administer, Monitor and Control General and
Subsidiary Ledgers
LG Code: EIS ACB3 M02 1121 LO (1-7)
TTLM Code: EIS ACB3 TTLM02 1121v1
Page I of 87
December, 2021
Addis Ababa, Ethiopia
TABLE OF CONTENTS PAGE
LG#9, LO1: Review accounts receivable process........................................................................1
Instruction sheet...............................................................................................................................1
Information Sheet 1.1 :- Checking receipts entered into accounts receivable system.....................2
Self-check 1.1 written test...............................................................................................................8
Information Sheet 1.2:- Identifying and recording incorrect entries...............................................9
Self-check 1.2 written test.............................................................................................................15
Information Sheet 1.3:- Identifying & Investigating discrepancies between monies owed and
monies paid....................................................................................................................................16
Self-check 1.3 Written Test and fill in the blank...........................................................................19
Information Sheet 1.4:- Amending receipts entered into accounts receivable system..................20
Operation Sheet-1:- Review account receivable process.............................................................21
Lap test :- Practical Demonstration...............................................................................................23
LG#10, LO2: Identify bad and doubtful debts............................................................................24
Instruction sheet.............................................................................................................................24
Information Sheet 2.1:- Reviewing debtor’s ledgers.....................................................................25
Self-check 2.1 fill in the blank.......................................................................................................27
Information Sheet 2.2 verifying bad or doubtful debt...................................................................28
Self-Check -2.2 Written Test.........................................................................................................35
Information Sheet 2.3:- Completing appropriate documentation for bad and doubtful debts.......36
Self-Check 2.3.1 Written Test.......................................................................................................38
Self-Check 2.3.2 workout question...............................................................................................39
LG#11, LO3: Review compliance with terms and conditions and plan recovery action.......40
Information Sheet 3.1:- Identifying and contacting clients in default of trading terms................41
Self-check 3.1 Written test............................................................................................................44
Information Sheet 3.2:- Act monies owing constituting breaches of organization credit policy. .45
Information Sheet 3.3:- Reviewing previous activities and communication with clients.............47
Information Sheet 3.4:- Developing plans to pursue debt recovery or to initiate legal action......48
LG#12, LO4: Prepare reports and file documentation..............................................................52
Information Sheet 4.1 :- Preparing and distributing reports..........................................................53
Information Sheet 4.2:- Filing documentation...............................................................................56
LG #13, LO5: Distribute creditors invoices for authorization..................................................58
Information Sheet 5.1:- Identifying, investigating and rectifying invoice discrepancies..............59
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Information Sheet 5.2:- Encoding and recording invoices correctly.............................................61
Information Sheet 5.3:- Requesting authorization for payment from appropriate personnel........63
Operation Sheet-1:- Invoice processing........................................................................................65
LG #14, LO6: Remit payments to creditors................................................................................66
Information Sheet 6.1:- Requesting and authorizing Cheque........................................................67
Information Sheet 6.2:- Debiting correct account in a timely manner in accordance with
legislative and compliance requirements.......................................................................................71
Information Sheet 6.3 preparing creditors payments.....................................................................73
Self-check 6.3 fill in the blank.......................................................................................................73
LG #15, LO7: Prepare accounts paid report and reconcile balances outstanding..................74
Information Sheet 7.1:- seeking statements of outstanding balances and reconciliation to invoices
received from suppliers..................................................................................................................75
Self-check 7.1 Written Test...........................................................................................................79
Operation Sheet-1:- Supplier Reconciliation Process....................................................................80
Lap test :- Practical Demonstration...............................................................................................81
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MODULE TITLE : Administer, Monitor and Control General and Subsidiary Ledgers
MODULE CODE : LSA ACF2 M02 0322
NOMINAL DURATION : 80 Hours
MODULE DESCRIPTION : This module covers the performance outcomes, skills and knowledge
required to reconcile and monitor financial accounts receivable systems, identify bad and doubtful
debts and plan à recovery action and remit payments to sundry creditors.
LEARNING OUTCOMES
At the end of the module the trainee will be able to:
LO1. Review accounts receivable process
LO2. Identify bad and doubtful debts
LO3. Review compliance with terms and conditions and plan recovery action
LO4. Prepare reports and file documentation
LO5. Distribute creditors invoices for authorization
LO6. Remit payments to creditors
LO7. Prepare accounts paid report and reconcile balances outstanding
LO8. Collect and record monies due
MODULE CONTENTS:
LO1. Review accounts receivable process (10hrs)
1.1.Checking receipts
1.2. Identifying and recording Incorrect entries
1.3. Identifying discrepancies
1.4.Amending receipts
LO2. Identify bad and doubtful debts (15hrs)
2.1.Reviewing debtors ledger
2.2.Verifying bad or doubtful debt status
2.3.Completing reporting procedures and documentation
LO3. Review compliance with terms and conditions and plan recovery action (10hrs)
3.1.Understanding accounting principles and practices
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3.2.Identifying Clients in default of trading terms
3.3.Acting Monies owing that breaches organization credit policy
3.4.Reviewing Previous activities and communication with clients
LO4. Prepare reports and file documentation (15hrs)
4.1.Understanding organization policies and procedures and industry requirements
4.2. Developing plans to pursue debt recovery
4.3.Preparing reports of accounts receivable, debt recovery type, cause and recovery plan
4.4.Filing documentation
LO5. Distribute creditors invoices for authorization (5hrs)
5.1.Identifying, investigating and rectifying invoice discrepancies
5.2.Requesting authorization for payment
LO6. Remit payments to creditors (10hrs)
6.1. Drawing and authorizing cheque requisition.
6.2.Debiting correct account
6.3.Preparing Creditors payments
LO7. Prepare accounts paid report and reconcile balances outstanding (5hrs)
7.1.Collecting and entering data into spreadsheet
7.2.Finding Statements of outstanding balances from suppliers
LO8. Collect and record monies due (10hrs)
8.1. Determining Status of debt
8.2. Recording and Maintaining Transactions on account
8.3. Maintaining Records of customer contact
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LG#9, LO1: Review accounts receivable process
Instruction sheet
This learning guide is developed to provide you the necessary information regarding the following
content coverage and topics:
 Entering receipts into accounts receivable system
 Identifying & accurately recording incorrect entries
 Identifying & investigating discrepancies between monies owed & monies paid
 Amend receipts entered into accounts receivable system according to established
procedure
This guide will also assist you to attain the learning outcomes stated in the cover page.
Specifically, upon completion of this learning guide, you will be able to:
 Enter receipts into accounts receivable system
 Identify & accurately record incorrect entries
 Identify & investigate discrepancies between monies owed & monies paid
 Amend receipts entered into accounts receivable system according to established
procedure
Learning Instructions:
Read the specific objectives of this Learning Guide.
Follow the instructions described below.
1. Read the information written in the “Information Sheets”. Try to understand what are
being discussed. Ask your trainer for assistance if you have hard time understanding
them.
2. Accomplish the “Self-checks” which are placed following each information sheets.
3. Ask from your trainer the key to correction (key answers) or you can request your
trainer to correct your work. (You are to get the key answer only after you finished
answering the Self-checks).
4. If you earned a satisfactory evaluation proceed to “Operation sheets placed at the end of
each LO
5. Perform “the Learning activity performance test” which is placed following “Operation
sheets”
6. If you earned a satisfactory evaluation proceed to the next learning guide.
7. Reflect broad conceptual knowledge and adaptive vocational and generic skills
8. Reflect essential knowledge, skills or attitudes;
9. Focus on results of the learning experiences;
10. Reflect the desired end of the learning experience, not the means or the process;
11. Represent the minimum performances that must be achieved to successfully complete
a course or program;
12. Answer the question, "Why should a student take this course anyway
TVET Program Title- Account and budget Version -1

Page 1 of 87 A.A TVET AND TECH support L-III
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Author/Copyright December, 2021
Module title – Administering Subsidiary
Accounts & Ledgers
Information Sheet 1.1 :- Checking receipts entered into accounts receivable system
Definition
Accounts receivable is short-term amounts due from buyers to a seller who have purchased
goods or services from the seller on credit. Accounts receivable is listed as a current asset on the
seller's balance sheet.
The total amount of accounts receivable allowed to an individual customer is typically limited by
a credit limit, which is set by the seller's credit department, based on the finances of the buyer
and its past payment history with the seller. Credit limits may be reduced during difficult
financial conditions when the seller cannot afford to incur excessive bad debt losses.
Accounts receivable are commonly paired with the allowance for doubtful accounts (a contra
account), in which is stored a reserve for bad debts. The combined balances in the accounts
receivable and allowance accounts represent the net carrying value of accounts receivable.
The seller may use its accounts receivable as collateral for a loan, or sell them off to a factoring
exchange for immediate cash.
Accounts receivable may be further subdivided into trade receivables and non-trade receivables,
where trade receivables are from a company's normal business partners, and non-trade
receivables are all other receivables, such as amounts due from employees.
Accounts receivable are also known as receivables.
Accounts Receivable Process

It's a simple turn of events that creates accounts receivable. In order to have an accounts
receivable, you need two things: a sale and a purchase. A company sells an item or a service to a
buyer and extends credit to that buyer so that the total cost of the sale can be paid later and on
terms that are agreed upon by the seller and the buyer.

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It is advisable for a company to setup an AR process to determine the customers that have
already paid and identify any payments that are overdue. The process is a simple turn of events
that make the Receivables traceable and manageable.
Four Main Steps for a Typical AR Process:
1. Establishing Credit Practices
2. Invoicing Customers
3. Tracking Payments Received and Payments Due
4. Accounting for Accounts Receivables
1. Establishing Credit Practices
The first step is for the company to develop a credit application process.
The company will then decide, based on the credit-worthiness of the applicant, as to whether
they will offer goods on credit. The company might choose to offer the credit to individual
customers or other businesses. Also, the company will establish terms and conditions for credit
sales. The document outlines the client’s obligations and requirements. The firm must ensure that
it complies with Federal laws on credit, such as full disclosure of the credit practices. For
example, the company has to clearly communicate the interest rates for the credit.
The terms and conditions differ for large and small firms. Large companies may opt to give a
customer longer periods of time. On the flip side, small firms cannot afford to offer goods on
credit for longer periods due to their less cash flow and low capital. How soon the money is
collected on this debt from the client will be a contributing factor in ascertaining the company’s
capital needed to run the business and the cash flow.
2. Invoicing Customers
An invoice is a document provided to the buyer detailing the products and services that have
been rendered, the costs of those products and services, as well as the date payment is expected.
Each invoice has to have a unique invoice number for easy retrieval. The customer is then given
the chance to choose whether they want to receive electronic or physical invoices. Large firms
prefer to send both the electronic and paper invoices.

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Unlike paper invoices, electronic invoices are less expensive and convenient. As such, small
firms mostly opt to use the mails to deliver the invoices.
The longer a company takes to send an invoice, the longer it takes for the customer to make
payments. The invoice must be sent promptly.
3. Tracking Payments Received and Payments Due
This step is performed by an Accounts Receivables (AR) Officer. The Officer keys out a
payment deposited into the bank account of the supplier, feeds it into the AR system, and then
allocates it to an invoice.
The officer also reconciles the AR ledger to be certain that all the payments are accounted for
and properly posted, and then issues monthly statements to clients. The statement provides
details for the customers about the amounts owed as per previously sent invoices.
The tracking process differs in large and small companies. Smaller companies may not have an
advanced system in place to track payments, and may use manual AR tracking by using tools,
such as Excel. In a manual process, companies use spreadsheets to record when they send the
invoices, and when they receive payments. Small companies also may not have enough staff to
appoint an AR Officer, in which the company may hire a professional accountant to fulfill this
function.
Larger companies typically invest in a team of AR Officers to conduct the tracking process, and
they use some form of an accounts tracking software system to help ensure accuracy. The system
helps the AR Officer to be more effective, because it automatically alerts the AR Officer to
which debt is outstanding.
4. Accounting for Accounts Receivable
Your accounts receivable are essential components to your financial statements. This means you
will need to record and account for them correctly in your accounts receivable process. . To do
this, you’ll want to make sure you document your accounts receivable through your invoices—
which should describe the goods or services you have provided the customer, the amount that is
owed to you, and when that amount needs to be paid

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There are two methods of accounting to consider when accounting for receivables. They
are:
1. Cash-basis accounting. In this type of accounting, revenue is considered revenue when
cash is received. Expenses are considered expenses when you pay for them. For cash-
basis accounting, track accounts receivable separately from revenue. Revenue isn’t
recorded until the cash is received.
2. Accrual-basis accounting. In this type of accounting, revenue is considered revenue
when the sale is incurred. Similarly, expenses are considered expenses when a cost is
incurred. Accounts receivable are recorded under this system. There is a risk the
customer may not pay. If they don’t pay, later you can charge these losses to expense.
Under the accrual basis of accounting (which we will be using throughout our discussion) a
sale on credit will:
1. Increase sales or sales revenues, which are reported on the income statement, and
2. Increase the amount due from customers, which is reported as accounts receivable—an asset
reported on the balance sheet.
If a buyer does not pay the amount it owes, the seller will report:
1. A credit loss or bad debts expense on its income statement, and
2. A reduction of accounts receivable on its balance sheet.
To optimize AR process, consider these steps:
1. Discuss payment terms early with each customer.
2. Use electronic payments early in the process.
3. Keep customer data accurate and up to date.
4. Always look for ways to enhance and improve collection process. One way to do this is
by using electronic billing
Accounts Receivable system helps you manage cash flow so that you have the flexibility you
need for effective cash management. It provides real-time information so you can make
immediate decisions about extending credit, forwarding collections, and applying cash.

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With the Accounts Receivable system, you can streamline the day-to-day functions of your entire
Accounts Receivable department. You can simplify and accelerate the process of applying
receipts, and have up-to-date information that improves communication among your billing and
credit and collections departments.
Accounts receivable systems contribute to businesses by providing formats for tracking and
collecting balances due from customers. An accounts receivable system that is current and
accurate provides you with a clear picture of how much incoming revenue you can expect to
have in the near future. Your accounts receivable system tells you who owes you money and
how much they owe, enabling you to target your collection efforts and improve cash flow.
Entering Receipts
Use the Receipts window to enter new or query existing receipts. For each receipt, you can see
whether the receipt is identified and what portion of the receipt has been applied, placed on-
account, and left unapplied.
You can enter two types of receipts in Receivables:
1. Cash receipts: Payment (such as cash or a check) that you receive from your
customers for goods or services.
o Miscellaneous transactions: Revenue earned from investments, interest, refunds,
and stock sales.
You can apply receipts to invoices, debit memos, deposits, guarantees, on-account credits, and
chargebacks. You can partially or fully apply a receipt to a single debit item or to several debit
items. You can enter receipts and apply them to transactions in either Open or Future accounting
periods. You can also create chargebacks or adjustments against these transactions.
If you do not specify a customer for a receipt, the receipt is unidentified. In this case, the receipt
amount appears in the unidentified field in the Receipts window (Application Summary
alternative region). You cannot apply an unidentified receipt.
Receipt Status
A receipt can have one of the following statuses:

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Approved: This receipt has been approved for automatic receipt creation. This status is only
valid for automatic receipts.
Confirmed: The customer has approved the application of this receipt and their account
balances have been updated within Receivables. This status is only valid for automatic receipts.
Remitted: This receipt has been remitted. This status is valid for both automatic and manually
entered receipts.
Cleared: The payment of this receipt was transferred to your bank account and the bank
statement has been reconciled within Receivables. This status is valid for both automatic and
manually entered receipts.
Reversed: This receipt has been reversed. You can reverse a receipt when your customer stops
payment on a receipt, if a receipt comes from an account with non-sufficient funds or if you want
to re-enter and reapply it in Receivables. You can reverse cash receipts and miscellaneous
transactions.
Receipts Entry Process
Receipts may include

 bankers orders
 cash
 cash journal entry
 cheques:
• Personal
• Bank
 credit cards:
• Direct
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• Mail
• Telephone
 direct debits
 direct drawing
 postal order
Self-check 1.1 written test
Name: _________________________ Date: _______________
1. What are receivables?

2. Write the four main steps in accounts receivable process
3. Write the two methods of accounting for receivables
Note: Satisfactory rating - 5 points Unsatisfactory - below 5 points

You can ask you teacher for the copy of the correct answers.
Score = ___________
Rating: ____________

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Information Sheet 1.2:- Identifying and recording incorrect entries
Accountants must make correcting entries when they find errors. There are two ways to make
correcting entries: reverse the incorrect entry and then use a second journal entry to record the
transaction correctly, or make a single journal entry that, when combined with the original but
incorrect entry, fixes the error.
After making a credit purchase for supplies worth $50 on April 5, suppose Mr. Green accidently
credits accounts receivable instead of accounts payable.
Mr. Green discovers the error on May 2, after receiving a bill for the supplies. He may use two
entries to fix the error: one that reverses the incorrect entry by debiting accounts receivable for
$50 and crediting supplies for $50, and another that records the transaction correctly by debiting
supplies for $50 and crediting accounts payable for $50.
Or Mr. Green can fix the error with a single entry that debits accounts receivable for $50 and
credits accounts payable for $50.

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Selecting an Order to Invoice
All invoices require a sales order to be entered first.

From the main menu select the receivables tab. Choose 'Select Order to Invoice' from the
transactions menu. This page shows all the orders outstanding. If the order number is known it
can be entered on this screen to select the order to invoice. Hit search orders and the order should
show below, together with links to modify the order, print the packing slip and to invoice. Click
the link to invoice the order.
Producing an Invoice from a Selected Order
Having selected an order to invoice the order line comes up for confirming the quantities of the
order that were dispatched. If the quantity dispatched differs from the order the difference is
recorded in the table Order Delivery Differences Log - and a report is available to show the
orders that were not able to be delivered with the first dispatch. There is also opportunity to enter
the freight charge and if necessary enter the tax charge - which will normally be calculated
automatically based on the tax authority of the customer branch being invoiced. The date of the
invoice is defaulted based on the time of day. If the hour (in 24 hour format) is after the setting
of $Dispatch Cut Off Time then the following day is deemed to be the invoice date, alternatively
the invoice date will default to today. Where not all lines on the order are being invoiced there
are two choices with how to deal with the balance.
1. Put the balance on back order
2. Cancel the line on the order
Finally there is also a field for entry of any text on the invoice. Hitting the process invoice button
updates the order as instructed and produces all the entries including general ledger postings (if

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integration is enabled in the company preferences screen - see setup) to record the invoice. Until
the process invoice button is hit, no entries have been saved to the database and it is safe to leave
the page at any stage without having changed anything - the invoicing process can be cancelled
at any time simply by following a link to another page. The processing that takes place once the
Process Invoice button is hit includes:
 Creation of the stock movements for each line item on the order - or for the assemblies
components - from the location entered at the time of the order, at the price as per the
order.
 Creation of the Debtor Trans record that records the invoice against the customer's
account.
 Creation of the general ledger journals to record the sale and debtor etc.
 Updating the order for amounts dispatched, and the invoice number.
 Creating/updating the sales analysis records of the items being sold.
 Updating the stock quantities for all lines of the invoice and the components of all
assemblies included on the order.
If the order is not to be invoiced to the customer or branch specified in the order, or pricing is to
be changed then the order must be changed. These elements cannot be altered at the time of
invoice; they must be altered in the order before it is confirmed for invoicing. Once an invoice is
created it cannot be deleted or modified. The order is also updated with the invoice number that
it was dispatched on.
Credit Notes
Credit notes can be created in one of two ways:
 From a customer inquiry screen if the user has the necessary permissions. Having clicked
this link there is opportunity to de-select some items from being credited so that only the
part of the invoice that needs to be credited can be, with only minimal keying. The same
credit note creation page as used in manual creation of credit notes will appear but with
all the items from the original invoice already entered into the credit note.

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 Using the link on the main menu under the receivables tab, select the link to create a
credit note.
Entry of Receipts
This system tracks the invoices and credits which are outstanding (a so called open item system)
in contrast to systems which use a balance brought forward from the previous month to add and
subtract current month transactions. Experience has shown balance forward systems whilst
intuitive, often result in queries for more information with the inevitable question from
customers "what was this balance made up of ?" . The statements produced by this system show
a full reconciliation of the amounts outstanding against invoices and credits that are yet to be
settled totaling the amount of the customer's account. In order to provide the necessary
information to track outstanding amounts, invoice by invoice, the detail of the makeup of
payments must be entered.
Payments received from customers are therefore entered in a two-stage process:
 The amount of the payment received is entered in foreign currency together with the
exchange rate at which this has been banked into local currency. Any details pertinent to
the receipt such as the date, method of payment and any details (which can be recalled
from inquiries later) are entered at this stage.
 The foreign currency received is allocated to the invoices (and debit journals) on the
customer's account. Put another way, the invoices that the payment is meant to be settling
are matched off against the payment.
If the details of the makeup of a payment received are not available at the time of banking, the
receipt can still be entered to stage 1. However, the allocation must be done before the statement
is produced if the account is to make sense.
Note: Differences on exchange are only calculated once the receipt is matched against the
invoices it is paying.

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Receipts relating to general ledger transactions can also be entered in the same batch as customer
receipts.
The process of entering receipts is initiated from the main menu under the receivables tab -
another link is also available from the general ledger tab.
Firstly, the receipt header information is required, the bank account - one of the previously
defined bank accounts , the date the batch of receipts are banked, the currency and exchange rate
of the banking and the type of receipt together with any narrative. The currency can be selected
from the defined currencies. Once this information is entered it must be accepted before the
receipts in the batch can be entered.
Receipt - Customer
By default once the customer has been selected the following information is displayed:
 The payment terms applicable, so amounts overdue can be easily noted from the
allocation screen without having to go back and do an inquiry.
 The payment discount percentage applicable. The user can then use this rate if applicable
to calculate the discount applicable, depending on how much of the payment relates to
"on time" invoices.
 The currency that the currency is paying in.
Receipt - Date
The date that the receipt was received and banked. If a receipt is being entered retrospectively -
or several days banking’s are being done together, the default date (i.e. the current date) should
be over written with the date the receipt was originally received. This date is used on the
statement and the customer may not be able to tie up the receipt if an incorrect date is entered.
Customer account inquiries are shown in date order so the account will not show correctly if the
date entered is not the date the money was received. The date is also used in the general ledger
transaction created.
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Receipts - Currency and Exchange Rate
Selection of the customer automatically tells the system which currency to expect the receipt in.
The customer's account is maintained in the currency selected in the customer maintenance
screen.
The correct rate at which the bank has converted the foreign currency to local currency must be
input, the system shows the calculation of the local currency banked at the bottom of the screen.
The receipt cannot (therefore) be entered until the amount in local currency is known. The exact
rate to enter in this field will be the foreign currency figure divided by the local currency figure.
E.g banked 1212 local, in customer's currency this was 400.
Rate is 400/1212 = 0.330033
The local currency calculated by the system should confirm that the rate entered is correct. The
general ledger integration - if enabled - will produce a bank deposit for the local currency
amount shown at the bottom of the screen, and reduce (credit) the Debtors Control account by
the same amount. The system defaults the exchange rate to that set up against the currency in the
currencies table.
When the receipt is matched to invoices, any differences between the local currency amounts
banked against the local currency invoiced are recorded against the invoices and written off the
general ledger Debtors Control Account and written into the profit and loss account - (specified
in the company record of the customer concerned) if the general ledger integration is enabled
from the module options screen.
Self-check 1.2 written test
Name: _________________________ Date: _______________

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1. List at least four types of receipts entered to account receivables?
2. Write the two-stage process entered when payments received from customers
Score = ___________
Rating: ____________
Information Sheet 1.3:- Identifying & Investigating discrepancies between monies

owed and monies paid
Receipts - Payment Method

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The payment method is stored against the receipt and shows on the customer's statement. A
banking report can also be run off based on the payment method to summarize the day's
banking’s, to automate the task of collating the different vouchers and summarizing for the bank.
Receipts - Amount
Note: Care should be taken when allocating negative receipts to ensure that only previous
allocations are reversed, strange results could occur if allocations are made to invoices not
previously allocated to positive receipts - although system integrity will be maintained.
Receipts - Discount
The amount of discount on a receipt can be entered at this point and allocated together with the
receipt as one amount. This is useful, where a customer pays an amount net of discount - quite
correctly according to his terms and conditions, and the amount naturally will not tie up to
invoices on its own without the addition of the discount. The system calculates the gross amount
of the payment including discount to set off the customer's account.
Receipts - Allocating to Invoices
Once all the details necessary have been entered for the receipt - the customer, the exchange rate
and the amount in foreign currency, the receipt is ready to be allocated to the invoices which are
to settle.
This concept can seem strange to businesses that have previously operated customer accounts
where they are only interested in the current months' transactions and the balance brought
forward from last month. The aim of this system is to remove the question from the customer's
lips ... "What is that figure, balance brought forward made up of?". Under the "Balance Forward"
system this question can be a tough one to answer, since there is no record of which invoices
were paid by which payment. However, this system needs explicit instructions for each receipt
on which transactions should be settled as a result.

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Note that allocations of a receipt are not allowed to another receipt. If necessary, negative
receipts can be used to reverse allocation against invoices and debit journals (although this is
undesirable). Once entered, receipts cannot be deleted - (obviously this would be undesirable
from the standpoint of proper internal controls).
If the whole of the receipt is not matched off against (allocated to) invoices and debit journals the
system will prompt to ensure that this is what was intended. Unlike many systems, allocations
can always be completed or amended later.
Differences on Exchange
The process of allocating receipts to invoices gives the system the information necessary to
calculate the difference on exchange since the receipt converted at the rate specified in the
receipt screen will equate to a different amount to the local currency equivalent of the invoices it
is matched to, unless both the receipt and the invoices it is allocated to are converted at the same
rate.
The difference calculated at the time of allocation can be seen on the receipt screen once the
allocations are done and the screen closed and is itemized against the invoices to which it is
allocated against. Unlike many systems the difference on exchange can be fully itemized
transaction by transaction. Inquiries on the detail of receipts show the difference on exchange
that the receipt is responsible for. Further the inquiry on where the receipt was allocated to will
show the analysis of where the difference on exchange for the receipt under review came from.
Alterations to the allocations naturally alter the difference on exchange. The general ledger
interface produces a journal for only the movement of the difference on exchange for a given
receipt each time its allocations are altered.
Receipts Processing

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Many customer receipts can be entered at a time and mixed together with receipts for nominal
items i.e. receipts from vending machine or sales of fixed assets reimbursement for private use of
company assets etc. Once all receipts have been entered the processing can take place. The
system only stores the data entered in a server side cookie called a session until such time as the
Process button is clicked.
The processing will give the batch of receipts a number and insert new receipt transactions
against customer accounts and update the customer's record with the amount of and the date of
the last payment. In addition if the general ledger interface is enabled, the journals to put the
receipt into the bank account specified and to decrease the Debtors control account - specified in
the company record are created. General Ledger journals are also created for the discount - if
any, with the corresponding entry to the Debtors Control account. All the necessary account
codes must be set up in the company preferences page under the setup tab and the bank account
set up page.
Discrepancies between monies owed and monies paid may occur as a result of:
 Deduction of brokers or agents commissions.
 Incorrect account allocation.
 Key stroke errors.
 Overpayments.
 Part payments.
 System errors.
 Termination of policies.
 Underpayments.
Organization policy, procedures and guidelines to identify & investigate discrepancies between
monies owed and monies paid may include:
 computer system documentation
 internal control guidelines
 legal obligations
 operations manuals
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 overall organisation goals and objectives
 suspension of credit facilities
 trading terms and credit limits
Self-check 1.3 Written Test and fill in the blank
Name: _________________________ Date: _______________

Directions: Answer all the questions listed below.
1. How does a discrepancy between monies owed and monies paid may occur?
2. Write the Organization policy, procedures and guidelines to identify & investigate
discrepancies between monies owed and monies paid
3. --------- is stored against the receipt and shows on the customer's statement.
Note: Satisfactory rating - 3 and 5 points Unsatisfactory - below 3 and 5 points

Score = ___________
Rating: ____________
Information Sheet 1.4:- Amending receipts entered into accounts receivable system
Deposits Listing
After processing has completed a link to print the deposit listing for the batch of receipts just
entered is shown. The batch number is also reported. The listing shows the information required
by banks in processing a batch of cheques. This deposit listing can be reprinted at any time from
a link under the accounts receivable tab - reports and inquiries.
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Operation Sheet-1:- Review account receivable process
 How to review the account receivable process effectively

Here are the steps to follow in order to review the account receivable process successfully
1. Record buyer details
Customer name (company or individual)
Account manager – Full name
Account manager - Phone number
Is this the first time you are expecting a payment from this buyer?

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Are you providing the buyer with goods or services?
2. Establish your credit practice
Send the buyer a credit application
Send the buyer a credit application for them to fill out.
The application should contain the following fields:
 Business name
 Their accounts department contact details
 The names of the directors of the business
 References from past suppliers they have ordered from
Run a credit check on the purchasing company
• to see their credit record
Approval: Post-credit check review
Send the buyer your terms of sale
3. Invoicing
Check customer payment terms
Generate and send invoice
4. Tracking
Record your activity digitally
Record all activity into your accounting system. Use the sub checklist below to record
which columns you are using to track activity:
• Date the invoice was sent
• Customer name
• Customer contact information
• Invoice number
• Link to digital invoice
• Amount
• Paid or not paid
• Date paid
Make a second physical copy

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If possible, keep a second printed copy of your important materials. These printed materials can
be used for securing against technical failures. They can also serve as security checks to ensure
data has not been retroactively tampered with. Print invoices and monthly overviews of activity.
Keep these materials clearly filed.
Establish monthly contact with your client

Send your clients a monthly statement outlining what they still owe. This document should also
show payments received. The client will then clearly know the unpaid balance they have
remaining with your company. This process allows you to send reminders to clients, encouraging
prompt payments.
5. Accounting for accounts receivable
Record for sales on credit of services

Record for sales on credit of goods
Lap test :- Practical Demonstration
Name: _____________________________ Date: ________________
Time started: ________________________ Time finished: ________________
Instructions: You are required to perform the following in group with the presence of your
teacher.
1. Create a group consisting 5 individuals assign each members tasks as follow:

 Customer (2)
 Account manager(3)
2. Record the customer data
3. Prepare credit applications

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4. Prepare invoices for customers
5. Track customer activity and record all the necessary data
LG#10, LO2: Identify bad and doubtful debts

Instruction sheet
 Reviewing debtor’s ledgers
 Verifying bad or doubtful debt
 Completing appropriate documentation for bad and doubtful debts
 Review debtor’s ledgers
 Verify bad or doubtful debt
 Complete appropriate documentation for bad and doubtful debts

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them.
each LO
sheets”
11. Represent the minimum performances that must be achieved to successfully complete a
course or program;
Information Sheet 2.1:- Reviewing debtor’s ledgers
First among different types of ledgers is “Sales or Debtors’ ledger”. It is a grouping of all
accounts related to customers to whom goods have been sold on credit (Credit Sales). Sum of all
the money owed to a business by their customers is shown here and is termed as Accounts
Receivable, Trade Debtors or Sundry Debtors.
The Debtors Ledger is one of the subsidiary ledgers to the general ledger. It accumulates
information as a result of monthly postings from the Sales Journal.

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The purpose of the Sales Journal is to store and provide detailed knowledge about financial
transactions involving sales to customers on credit i.e. no money was paid by the customer at the
time the sale was made.
The purpose of the Debtors Ledger is to provide information on which customers owe money to
the business as a result of sales in credit, and of course, how much they owe. The customers who
owe money to the business are called DEBTORS.
A debtors' control account is maintained in the general ledger following the principles of double
entry accounting. Into this account are posted totals of debtor transactions.
 The total of the sales journal (representing the total amount of credit given to clients) is
debited to debtors' control account and credited to fees account.
 The total of the 'Debtors' column in the cash receipts journal (representing the total
amount that debtors have paid the business) is credited to debtors' control account and
forms part of the total of the cash receipts journal which is debited to bank account.
The balance of the debtors' control account will be the total amount owed to the business by its
debtors.
Debtors' subsidiary ledger
The debtors' subsidiary ledger is a sub-system in the overall accounting system.
 It maintains an account for each debtor and records detailed information (not totals) about
debtors from the sales journal and cash receipts journal.
 It is a single entry system which operates outside the general ledger so is not included in
the trial balance. (If the trial balance contained both the debtors' control account balance
and the balances of each individual debtor it would be double counting).

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 The sum of all the debtors' balances in the debtors' subsidiary ledger (which is shown by
preparing a schedule or list of debtors' balances) should be equal to the balance of the
debtors' control account in the general ledger.
A business needs to monitor debtor payments using some of the following techniques: Get a
credit check by using a reputable credit agency Get 3 references on the customer from their
current suppliers Clearly indicating the credit terms being offered Enforcing credit terms as
agreed Ensure that all invoices and statements are accurate and delivered promptly. Stop service
to any delinquent payer Offer discount for early settlement Review debtors regularly to confirm
that the credit terms are being observed. A business needs to monitor debtor payments using
some of the following techniques: Get a credit check by using a reputable credit agency Get 3
references on the customer from their current suppliers Clearly indicating the credit terms being
offered Enforcing credit terms as agreed Ensure that all invoices and statements are accurate and
delivered promptly. Stop service to any delinquent payer Offer discount for early settlement
Review debtors regularly to confirm that the credit terms are being observed.
Self-check 2.1 fill in the blank
Name: _________________________ Date: _______________

1. is a grouping of all accounts related to customers to whom goods have been sold
on credit (Credit Sales).
2. Sum of all the money owed to a business by their customers is shown here and is termed
as

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Score = ___________
Rating: ____________
Information Sheet 2.2 verifying bad or doubtful debt
A bad debt is an account receivable that has been clearly identified as not being collectible. This
means that you remove that specific account receivable from the accounts receivable account,
usually by creating a credit memo in the billing software and then matching the credit memo
against the original invoice; doing so removes both the credit memo and the invoice from the
accounts receivable report.
A doubtful debt is an account receivable that might become a bad debt at some point in the
future. You may not even be able to specifically identify which open invoice to a customer might
be so classified. In this case, create a reserve account (also known as a contra account) for

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accounts receivable that may eventually become bad debts, estimate the amount of accounts
receivable that may become bad debts in any given period, and create a credit to enter the
amount of your estimate in this reserve account, which is known as the allowance for doubtful
accounts. The debit in the transaction is to the bad debt expense. When you eventually identify
an actual bad debt, write it off (as described above for a bad debt) by debiting the allowance for
doubtful accounts and crediting the accounts receivable account.
Many organizations have a dedicated credit control manager or team. Their primary objective is
to ensure that cash is received from the customer within the organization’s credit terms, which
are in the form a pre-determined number of days (for example 30 days from the invoice date).
Credit terms are set using a formal assessment of the customer’s ability to pay based upon bank
references and other checks
Other activities/responsibilities that are likely to fall within the scope of the credit control team
include:
1. Recording cash receipts and payments
2. Establishing follow-up procedures which usually include phone calls, emails and letters, with
different levels of escalation
3. Reconciling the sales ledger/debtors ledger to ensure that all payments are accounted for and
are properly posted. This involves matching the detailed amounts of unpaid customer debt to the
accounts receivable total stated in the general ledger. This matching process is important, as it
proves that the general ledger figure for receivables is justified
4. Preparation of monthly, quarterly or annual management information/reports detailing
outstanding balances and other accounts receivable activity.
It is good practice for a member of the finance team to issue statements to customers where they
asked to confirm the outstanding debt balance. This enables any errors or anomalies to be
identified and corrected at the earliest opportunity.

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The automatic recording of debtor balances from sales invoices raised and reconciliations of the
general ledger balances to sub ledgers are further methods of determining whether the balance is
incomplete or inaccurate.
The credit control manager should periodically review outstanding debts (aged accounts
receivable listings) to determine whether balances which are nearing or have surpassed their
collection date mare fully recoverable.
If balances are not recoverable then these amounts will need to be written off as an expense to
the profit and loss account. If balances are not chased on a timely basis, this may reduce the
probability of recovery resulting in an inflated profit figure and potential cash flow issues.
The credit control manager should also engage in dialogue with the customer as amounts
approach their overdue date to establish why monies owed are not being paid. This is particularly
important at period end where the accuracy and recoverability of the receivable balances will be
scrutinized by the organization’s external auditors.
The identification of inaccurate or unrecoverable balances by the external auditors may lead to
provision of bad debts being or debts written off, both of which will reduce the organization’s
profits.
Comparison of the total balance or list of balances against the previous month or quarter is also a
useful check on how debt is increasing or declining although this needs to take into account
known anomalies such as busy periods or customer trends. Failure to perform analytical
procedures such as these may result in a gradual increase in debt that goes unnoticed or
inaccurate balances going undetected.
When debtors fail to settle their accounts for items sold on credit a bad debt will occur. A bad
debt is an amount that is written off by the business as a loss to the business and classified as an
expense because the debt owed to the business is unable to be collected, and all reasonable
efforts have been exhausted to collect the amount owed. This usually occurs when the debtor has
declared bankruptcy or the cost of pursuing further action in an attempt to collect the debt
exceeds the debt itself.

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The debt is immediately written off by crediting the debtor’s account and therefore eliminating
any balance remaining in that account. A bad debt represents money lost by a business which is
why it is regarded as an expense.
Doubtful debts are those debts which a business or individual is unlikely to be able to collect.
The reasons for potential non-payment can include disputes over supply, delivery, and conditions
of goods or the appearance of financial stress within a customer’s operations. When such a
dispute occurs it is prudent to add this debt or portion thereof to the doubtful debt reserve. This is
done to avoid over-stating the assets of the business, as trade debtors are reported net of Doubtful
debt. When there is no longer any doubt that a debt is uncollectable the debt becomes bad. An
example of a debt becoming uncollectable would be: – once final payments have been made
from the liquidation of a customer’s limited liability company, no further action can be taken.
To be considered as deductible, debts:
-must be a bona-fide debt, and
-worthless within the taxable year
An Ageing Debtors Schedule is set up where the debts are scheduled according to their age
starting with from youngest to the oldest debts. This will assist in the calculation of bad debts,
where the older debts are given a higher probability of bad debt, as well to determine those older
debts that may not be collectible.
There are two methods of accounting for bad debts:
A. Allowance for doubtful accounts method, and
B. Direct write-off method
A. Allowance for Doubtful Accounts

In the allowance for doubtful accounts method, bad debts expense is estimated and recognized in
the period in which the relevant revenue is recognized. This makes it a more appropriate method
compared to direct write-off method (discussed below) because it is in accordance with the
matching principle of accounting.

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In each period, doubtful debts are estimated and expensed out by debiting bad debts expense
account and crediting allowance for doubtful accounts account. The following journal entry is
used to record the allowance:
Bad debts expense…….xxx
Allowance for doubtful debts….xxx
There are two methods for estimating allowance for bad debts:
1. Percentage of receivables, and
2. Percentage of sales.
Subsequently, when it is confirmed that a particular account receivable is no longer collectible, it
is removed by debiting the allowance for doubtful debts account and crediting the receivable.
The following journal entry is used to record the write-off:
Allowance for doubtful debts xxx
Accounts receivable xxx
1. Percentage of receivables
Percentage of receivables method is a balance sheet approach to bad debts estimation. It
calculates bad debts as a percentage of ending accounts receivable. This is usually done using a
procedure called aging of accounts receivable.
Unlike the percentage of sales method, the percentage of receivables method does not directly
estimate bad debts expense. This method actually estimates the ending balance of allowance for
bad debts account. The estimated bad debts expense is then calculated as shown below:
Ending Balance of Allowance for Bad Debts A/C
− CR Balance in Allowance for Bad Debts; or
+ DR Balance in Allowance for Bad Debts
The journal entry to record the bad debts expense as calculated above is:
Bad Debts Expense ……xxx
Allowance for Doubtful Debts…….xxx
When this method is used, the accountant asks the question, “how much of the year-end balance
of Account Receivable will not be collected?” The difference between the amount determined to

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be uncollectible and the prior balance of the Allowance for Uncollectible Accounts is the
expense for the year. The aging of Account Receivable is the process of listing each customer’s
account according to the due date of the account. Assume that the more the account receivable is
past due, the less likely that it will be collected.
Example:
Computed balance for uncollectible accounts……………………. Br2, 459
Less: Credit balance in allowance for Uncollectible Accounts…….…..800
Uncollectible Accounts Expense for the period………………… Br1, 659
The adjusting entry to record the uncollectible account receivable estimated using the aging of
receivable method is:
Uncollectible Accounts Expense 1,659
Allowance for Uncollectible Accounts 1,659
Example
On year end Dec 31, 20XX, Company λ estimated that $6,000 of its accounts receivable will
remain uncollectible. The current balance in allowance for bad debts account is $1,000 CR.
Calculate the bad debts expense and pass the adjusting entry to record the bad debts expense.
Solution
Bad Debts Expense = $6,000 − $1,000 = $5,000
Adjustment Journal Entry:
Bad Debts Expense 5,000
Allowance for Doubtful Debts 5,000
Ending Allowance for Bad Debts = $5,000 + $1,000 = $6,000
2. Percentage of sales
Percentage of sales method is an income statement approach for estimating bad debts expense.
Under this method bad debts expense is calculated as percentage of credit sales of the period.
The percentage figure is calculated on the basis of past performance and other factors such as

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change in credit policy. In percentage of sales method, the balance in the allowance for doubtful
debts is ignored. Bad debts expense is calculated via the following formula:
Bad Debts Expense = Estimated % × Credit Sales
After the estimation of bad debts, an adjusting entry is passed to recognize bad debts expense.
The entry involves a debit to bad debts expense account and a credit to allowance for doubtful
debts account. The procedure is illustrated in the following example:
Example
Credit sales of Company A during the year ended December 31, 2010 was $304,930. The
company estimated that 3% of its credit sales will end up uncollected. The allowance for
doubtful debts of the company had a credit balance of $1,418 on December 31, 2010. Calculate
the bad debts expense to be recognized at the end of the period and the new balance of the
allowance for doubtful debts account. Also prepare the adjusting entry to recognized bad debts
expense
Solution
Bad Debts Expense = 3% × $304,900 = $9,147
Adjusting Entry on December 31, 2010:
Bad Debts Expense………9,147
Allowance for Doubtful Debts……9,147
New Balance of Allowance Account = $1,418 + $9,147 = $10,565 Credit
This method asks the question, “How much of this year’s net sales will not be collected?” The
answer is the amount of uncollectible expense for the year. It is usually based on the company’s
historical background interns of default rate of accounts receivable collection. Allowance for
Uncollectible Accounts contains the accumulated amount from previous years.
For instance, the adjusting entry to record uncollectible accounts expense at 2% of Br 600,000
net sales will be:
Uncollectible Accounts Expense 12,000
Allowance for Uncollectible Accounts 12,000
What is a bad debt provision?

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A bad debt provision is a reserve against the future recognition of certain accounts receivable as
being uncollectible. For example, if a company has issued invoices for a total of $1 million to its
customers in a given month, and has a historical experience of 5% bad debts on its billings, it
would be justified in creating a bad debt provision for $50,000 (which is 5% of $1 million).
A bad debt provision is created with a debit to the bad debt expense account and a credit to the
bad debt provision account. The bad debt provision account is an accounts receivable contra
account, which means that it contains a balance that is the reverse of the normal debit balance
found in the associated accounts receivable account. Later, when a specific invoice is found to be
uncollectible, you create a credit memo in the accounting software for the amount of the invoice
that is uncollectible. The credit memo reduces the bad debt provision account with a debit, and
reduces the accounts receivable account with a credit. Thus, the initial creation of the bad debt
provision creates an expense, while the later reduction of the bad debt provision against the
accounts receivable balance is merely a reduction in offsetting accounts on the balance sheet,
with no further impact on the income statement.
The reason for a bad debt provision is that, under the matching principle, a business should
match revenues with related expenses in the same accounting period. Doing so shows the full
effect of a billed sale transaction in a single accounting period. If you were to not use a bad debt
provision, and instead used the direct write off method to only charge bad debts to expense when
you were certain that a specific invoice was not collectible, then the charge to expense might be
many months later than the initial revenue recognition associated with the billing. Thus, under
the direct write off method, profits will be too high in the period of the billing to the customer,
and too low in the later period when you finally charge some portion or all of an invoice to the
bad debt expense.
Bad or doubtful debts are identified through:

 banks forgoing overdrafts
 closure of business
 dishonoured cheques

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 gazette listings
 letters from solicitors/legal representatives or accountants
 notices of administration
 returned mail
 sheriff/police notices or advertisements
 utilities being cut off
Self-Check -2.2 Written Test

1. What is the difference between bad debt & doubtful debt?
2. Write the two methods accounting for bad debts
3. What does it mean by bad debt provision?
4. Write the means through which bad or doubtful debts are identified

Score = ___________
Rating: ____________
Information Sheet 2.3:- Completing appropriate documentation for bad and doubtful debts
Reporting Bad Debts

Bad debt can be reported on the financial statements using the direct write-off method or the
allowance method.
1. Direct write-off method

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One procedure used by most small businesses is to wait until they make sure that the account of a
specific customer is definitely uncollectible to record the expense. The firm may carry the
account on its books until the account has definitely become uncollectible. Then, the direct
charge-off method recognizes the loss at the time the Account Receivable is determined to be
uncollectible. It Reduces Account Receivable and increases Uncollectible Accounts. The amount
to be charged-off as a loss is debited to an expense account called Bad Debts Expense, and
credited to the asset account Accounts Receivable of the customer.
The direct write-off method involves writing off a bad debt expense directly against the
corresponding receivable account. Therefore, under the direct write-off method, a specific dollar
amount from a customer account will be written off as a bad debt expense.
However, the direct write-off method can result in misstating the income between reporting
periods if the bad debt journal entry occurred in a different period from the sales entry. For such
a reason, it is only permitted when writing off immaterial amounts. The journal entry for the
direct write-off method is a debit to bad debt expense and a credit to accounts receivable.
Suppose that Rosa Company, a customer of the Style Clothing, has bankrupted before paying its
account balance of Br. 750 and the Style Clothing decided to write-off the account as a bad debt
as follows:
Sept. 16. Bad Debts Expense…….750
Accounts Receivable……….750
2. Allowance method
The allowance method estimates bad debt expense at the end of the fiscal year, setting up a
reserve account called allowance for doubtful accounts. Similar to its name, the allowance for
doubtful accounts reports a prediction of receivables that are “doubtful” to be paid.
In contrast to the direct write-off method, the allowance method is only an estimation of money
that won’t be collected and is based on the entire accounts receivable account. The amount of

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money written off with the allowance method is estimated through the accounts receivable aging
method or the percentage of sales method. An example of an allowance method journal entry can
be found below.
This method has two advantages over the direct write-off method:
(1) Bad debt expense is charged to the period in which the related sales are recognized, and
(2) A/R is reported on the Balance Sheet at the estimated amount of cash to be collected.
Entry 1: The amount of bad debt is estimated using the accounts receivable aging method or
percentage of sales method and is recorded as follows:
Entry 2: When a specific receivables account is deemed to be uncollectible, allowance for

doubtful accounts is debited and accounts receivable is credited.
Self-Check 2.3.1 Written Test

1. What are the two methods of reporting bad debts?
2. What is the advantage of allowance method over direct write off method

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Score = ___________
Rating: ____________
Self-Check 2.3.2 workout question
Name: _____________________________ Date: ________________

Instructions: You are required to perform the following individually

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1. Assume Wonji Co. has credit sales of Br. 500,000 in 20X2. Based on past experience
and the experience of other Cos, Wonji Co. estimated 0.007% of credit sales are
uncollectible.
A. Prepare the adjusting entries to record uncollectible accounts at the end of the
period, 20X2
B. Assume that Allowance for Doubtful Accounts has a credit balance of Br.
1000 before adjustment. Now, what will be the balance of Allowance for
Doubtful Accounts be at the end of 20X2?
2. If Wonji Co. uses a direct write-off method and determines on Feb. 20, it can’t collect
from a customer- Home Co.- Br.500. Record the necessary adjusting entries to write
off customer’s account

Score = ___________
Rating: ____________

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LG#11, LO3: Review compliance with terms and conditions and plan recovery
action
Instruction sheet
 Identifying and contacting clients in default of trading terms
 Acting credit policy monies owing that constitute breaches of organization
 Reviewing previous activities and communication with clients
 Developing plans to pursue debt recovery or to initiate legal action
 Identify and contact clients in default of trading terms
 Act credit policy monies owing that constitute breaches of organization
 Review previous activities and communication with clients
 Develop plans to pursue debt recovery or to initiate legal action
being discussed. Ask your trainer for assistance if you have hard time understanding them.
3. Ask from your trainer the key to correction (key answers) or you can request your trainer
to correct your work. (You are to get the key answer only after you finished answering the
Self-checks).
4. If you earned a satisfactory evaluation proceed to “Operation sheets placed at the end of each
LO
sheets”
course or program;
Information Sheet 3.1:- Identifying and contacting clients in default of trading terms
Clients may include:

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 accountants
 agents
 brokers
 customers
 intermediaries
 policy holders
 solicitors/ legal representatives
Trade credit is a business-to-business (B2B) agreement in which a customer can purchase goods
without paying cash up front, and paying the supplier at a later scheduled date. Usually,
businesses that operate with trade credits will give buyers 30, 60, or 90 days to pay, with the
transaction recorded through an invoice. Trade credit is an advantage for a buyer. In some cases,
certain buyers may be able to negotiate longer trade credit repayment terms, which provide an
even greater advantage. Often, sellers will have specific criteria for qualifying for trade credit.
With trade credit, there is the possibility of default. Companies offering trade credits also usually
offer discounts, which means they can receive less than the accounts receivable balance. Both
defaults and discounts can require the need for accounts receivable write-offs from defaults or
write-downs from discounts. These are considered liabilities a company must expense.
Collecting debt while retaining a customer relationship is both an art and a science, but most
business leaders approach this mission in one of two extreme ways: One way is to pretend the
problem doesn’t exist because either the company owner is in denial, fears adverse interactions
with the customer involved or hopes to make up the default with more growth.
The other extreme involves business owners who take an aggressive, all-out approach to
collecting debt and end up threatening the customer with real or made-up legal action
and destroying any good will, as well as the brand itself, in the process. Often these owners will
use aggressive collection agencies. In turn, that action causes 25 percent of consumers with debt
in collections to feel threatened

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Is a customer not paying your invoice? Or only wants to pay a part of the invoice? This step-by-
step plan outlines what you can do to get paid after all.
1. Check whether the payment term is correct
If you sell products or provide services, your customer must pay within an agreed timeframe. For
consumers, you can determine the payment term yourself. Do you supply to companies and
governments (B2B)? In that case, legal payment terms apply.
2. Call your customer
Depending on your relationship with the customer, it is sometimes wise to call first. Ask whether
the service has been satisfactory and whether the invoice is correct. This personal approach
allows you to inquire why payment has not been made. Always make notes of these phone
conversations.
3. Send a payment reminder
A payment reminder is the first formal step if your invoice is not paid within the agreed term. It
is a friendly reminder that you send a few days after the payment term has expired. State that you
will charge the statutory interest if your customer continues not to pay.
4. Send a letter of formal notice
If your customer is a consumer, you are obliged to first send a demand for payment, free of
charge. You comply with this by sending a letter of formal notice. Is your customer a company?
Then you are not obliged to do this and you can follow the collection procedure described in
your general terms and conditions.
Contents of the notice letter
A letter of formal notice is a demand for payment, also known as a demand letter, in which you:
 refer to the delivery, the invoice, any telephone calls, and the payment reminder;
 set a payment term of 14 days;
 Mention collection costs and legal action if payment is not made.
Send the letter both by registered post with confirmation of receipt and by regular mail. Keep
your own copies of the letters as well. You can also send the notice by email. But if you want to
be sure that your letter of formal notice arrives, it is better to send it by registered post and ask

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for a confirmation of receipt. This way you are legally covered if your customer denies that they
have received the letter.
5. Charge collection costs and statutory interest
Is your customer still not paying your invoice or much too late? Then you may charge collection
costs and statutory interest. Collection costs are the costs creditors incur when they have to put
extra effort into receiving their money from customers who do not pay the invoice on their own.
You may also charge statutory interest. This is the interest that you can legally claim if your
customer has overdue payments.
6. Make a payment arrangement
It is not wise to immediately propose a payment arrangement to your customer. First investigate
whether the customer can pay your invoice with, for example, a week’s delay. Is this not possible
for your customer? Then agree on a payment arrangement. Put this arrangement in writing and
agree that the arrangement will lapse if your customer does not pay at the agreed times.
7. Engage a debt collection agency, bailiff, or debt collection lawyer
Are you unable to make your customer pay the outstanding invoice? Then consider engaging
a debt collection agency, bailiff, or debt collection lawyer. These are companies that collect
invoices on your behalf:
 A debt collection agency sends letters requesting payment, but may not enforce payment.
 A bailiff can start legal proceedings. They can also use coercive measures, such as
seizure and sale of your customer's goods. To do so, they usually first need a decision
from a judge.
 A debt collection lawyer can send reminders, prepare a summons, and file for a debtor's
bankruptcy.
8. Use Other Legal Remedies
You have delivered products or goods that were not paid on time. You might prefer to get these
back in order to limit your damage as much as possible. There are 2 ways to do this:
 Retention of title: do your general terms and conditions contain retention of title? Then
you remain the owner of a delivered product until the customer has paid. You can reclaim
your delivered goods as long as your customer does not pay.

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 Right of recovery: this is a legal provision that allows you to reclaim delivered goods if
your customer does not pay. This is also possible in the event of deferment of payment
(moratorium) or bankruptcy.
9. Reclaim non-recoverable VAT
If you send an invoice to your customers, you must file and pay the VAT on it. If your customer
ultimately does not pay or only partially pays the invoice, your claim is (partially) non-
recoverable. You paid VAT that you did not receive. You can then reclaim this VAT.
10. File for clients’ bankruptcy
Does your customer ultimately not pay your invoice? Then you can file for the
customer's bankruptcy. If your customer has already been declared bankrupt, submit your claim
to the curator as soon as possible. This is officially called 'submission for verification'. Call in a
specialized advisor for this.
11. Avoid Risks of Default
There are several ways to prevent financial loss from customers who do not pay, such as:
 Taking out credit insurance.
 Checking the financial situation of business clients.
 Drawing up general terms and conditions.
Self-check 3.1 Written test

Name: _________________________ Date: _______________
1. What is trade credit?
2. List the types of clients

You can ask you teacher for the copy of the correct answers. Score = ___________
Rating: ____________
Information Sheet 3.2:- Act monies owing constituting breaches of organization credit
policy
A credit policy is a set of guidelines that

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 are used to determine which customers are extended credit and billed;
 set the payment terms for parties to whom credit is extended;
 define the limits to be set on outstanding credit accounts; and
 Outline the steps or procedures used to deal with delinquent accounts.
Credit control, also called credit policy, includes the strategies employed by businesses to
accelerate sales of products or services through the extension of credit to potential customers or
clients. At its most basic level, businesses prefer to extend credit to those with “good” credit and
limit credit to those with “weak” credit, or possibly even a history of delinquency. Credit control
might also be called credit management, depending on the scenario under review. A business's
success or failure primarily depends on the demand for products or services. As a rule of thumb,
higher sales lead to bigger profits, this in turn leads to higher stock prices. Sales, a clear metric in
generating business success, in turn, depend on several factors. Some, like the health of the
economy, are exogenous, or out of the company’s control, other factors are under a company’s
control. These major controllable factors include sales prices, product quality, advertising, and
the firm’s control of credit through its credit policy.
In general, credit control seeks to extend credit to a customer to make it easier for them to
purchase a good or service. This strategy delays payment for the customer, making the purchase
more attractive, or it breaks the purchase price into installments, also making it easier for a
customer to justify the purchase, though interest charges will increase the overall cost.
The benefit for the business is increased sales which lead to increased profits. The important
aspect of a credit control policy, however, is determining who to extend credit to. Extending
credit to individuals with a poor credit history can result in not being paid for the good or service
sold. Depending on the business and the amount of bad credit extended, this can adversely
impact a business in a serious way. Businesses must determine what kind of credit control policy
they are willing and able to implement.
Credit policies are critical documents for nearly every organization, but especially for those B2B
businesses who manage trade credit. Nearly every construction industry business is in this
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position, as construction materials, labor, and services are typically furnished and then billed,
leaving these companies with cash and credit management challenges.

Name: _________________________ Date: _______________
1. Explain what credit policy is

2. Write the benefit of credit policy to business companies

Score = ___________
Rating: ____________
Information Sheet 3.3:- Reviewing previous activities and communication with

clients
Communication is fundamental to relationships in business. Good communication helps

businesses develop trust with clients and clearly articulate needs, expectations and challenges.

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Communicating more effectively can improve the client relationship and potentially add more
leads to the business.
What is Client Communication?
Client communication is any communication between a business and its clients. This can include
written communication, like emails and invoices, verbal communication, like phone calls, and
physical communication, like the body language you use while face to face with clients. Good
client communication often involves actively listening to your customers to interpret their
emotions and better cater to their needs.
Client communication is important because it establishes and maintains trust between the client
and the business. When customers trust a brand, they may be more likely to remain loyal. Open
client communication can also help limit misunderstandings, lead to greater customer satisfaction
and make clients more likely to recommend a business to others.
Name: _________________________ Date: _______________
1. What does it mean by client communication? Also write its benefits

Score = ___________
Rating: ____________
Information Sheet 3.4:- Developing plans to pursue debt recovery or to initiate legal
action
As a business, it’s important that you get paid what you’re owed by your customers and your
clients. Late payments, and people trying to avoid paying for goods and services, can be costly to
your business and have long-lasting and damaging repercussions.

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Debt recovery processes
1. Invoicing
The process for debt recovery should begin with you invoicing your clients as normal. You and
your clients should have already agreed on payment terms, so, ideally, at this point, you should
wait for confirmation that you’ve received payment.
2. Chase
It’s common for invoices to have a payment term of 30 days stipulated at the bottom. If it turns
out that you haven’t been paid by a client when you were expecting, then you should begin the
process of chasing up the invoice. Send additional emails or make phone calls to politely remind
the client that they need to pay for the work you’ve completed for them; otherwise the situation
will continue to escalate.
3. Credit hold
One way to prompt a client to pay is to stop doing any work for them until they have paid their
outstanding debt to you. This is sometimes referred to as a credit hold or administrative hold,
whereby work on an account stops due to a lack of funding.
In many cases, this is likely to solve the problem as a business might suffer without the services
you are providing to them. However, if this doesn’t result in you receiving your payment then
you do have other options.
4. Final notice
The final notice is the last piece of correspondence you’re likely to send the client before legal
proceedings begins. This highlights to them that they have until a certain deadline, which you
can decide, to settle any debts with you, before you begin pursuing legal action against them to
claim the money you’re owed. If this final notice doesn’t see your client settle any outstanding
payments with your business, then you have different options to pursue when considering legal
action.
5. Legal action
Your last resort is to pursue legal action against your client. When this happens, you have two
options open to you; depending on the amount your business is owed:
1. Small claims court

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The small claims court will allow both sides (you and your client) to mediate and reach a
conclusion. This will usually mean the client is ordered to repay any debt, interest and fees,
which have been accrued as a result of having to pursue legal action.
2. Debt collection
The other legal option is to enlist the help of debt collection specialists. You can access fixed
fees for sending a solicitors’ letter to the debtor, issuing proceedings for non-payment and taking
enforcement action to recover under a judgment.
Plan recovery action Collection Process

Debt collection is an unfortunate reality for most businesses. When customers are ultimately
unable to pay for their purchase, the impact of those lost dollars can be significant. For small
businesses especially, failure to collect on outstanding accounts receivables can have dire
consequences.
Companies may employ a variety of methods to collect on past due invoices, such as phone calls,
emails, letters, and site visits. These can be time-consuming and costly. Regardless of the method
used, when it comes to business debt collections, efficiency is the name of the game. The sooner
companies can receive payment on goods and services rendered; the better it is for their bottom
line.
When it comes to staying ahead of bad debt, what strategies should you apply to ensure that
outstanding debt is recovered in the most time- and cost-effective way? This article discusses
some of the most common business debt collections best practices, how they work, and why they
might not work for you.
Accounts Receivable Collections Best Practices
For most companies, it’s the accounts receivable department’s responsibility to manage debt
collection. However, in some instances, customers may dispute an invoice and refuse to pay if
they’re dissatisfied with the products or services they received. Billing errors and pricing issues,
such as promotions and discounts not applied, are also common reasons for disputes. When this
happens, other departments, such as sales and customer service, may step in to assess the
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problems and determine the best course of action. Often, the issue is resolved before it’s ever
deemed uncollectible.
However, if a dispute cannot be resolved, the delinquent account might land in collections.
Typically, the process goes as follows:
1. Before any action is taken, it’s best to confirm that the customer was, in fact, issued an
invoice.
2. Next, the customer is contacted via automated phone call or email and reminded that their
account is past due. They are asked to pay immediately, or risk incurring late payment
penalties or interest.
3. If the customer does not respond within 24-72 hours, a staff member may follow up by
phone.
4. At the same time, a letter is sent by mail.
This process may be repeated several times, depending on the company’s grace period. The
average collection period for accounts receivable is 30 days, and payments are considered
severely delinquent when they’re more than 90 days past due. When the payment hits the 120-
day mark or is deemed uncollectable, the account may be sent to a 3rd party collections agency
(or debt collector)
Name: _________________________ Date: _______________
1. Write the debt recovery processes?

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Score = ___________
Rating: ____________

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LG#12, LO4: Prepare reports and file documentation
Instruction sheet
 Distributing and preparing reports cause and recovery plan of account receivable
 Filing documentation promptly
 Distribute and preparing reports cause and recovery plan of account receivable
 File documentation promptly
1. Read the information written in the “Information Sheets”. Try to understand what
are being discussed. Ask your trainer for assistance if you have hard time
understanding them.
2. Accomplish the “Self-checks” which are placed following each information
sheets.
trainer to correct your work. (You are to get the key answer only after you
finished answering the Self-checks).
4. If you earned a satisfactory evaluation proceed to “Operation sheets placed at the
end of each LO
5. Perform “the Learning activity performance test” which is placed following
“Operation sheets”
11. Represent the minimum performances that must be achieved to successfully
complete a course or program;

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Information Sheet 4.1 :- Preparing and distributing reports
Prepare and distribute reports which document accounts receivable, debt recovery type, and
cause and recovery plan
What is Accounts Receivable Aging report?
The aging of accounts receivable is the process of listing your unpaid invoices and other
receivables by their due dates. This is done to estimate which invoices are overdue for payments.
The accounts receivable aging report, also known as the accounts receivable reconciliation,
summarizes the total outstanding customer estimates broken up by the age of the invoice. It is
one of the primary tools used by businesses to determine the effectiveness of credit and
collection function
The report is broken up by intervals of 0-30 Days, 31-60 Days, 61-90 Days, and 90+ Days. This
shows business owners how much amount is due and which accounts require immediate action.
How to Prepare Accounts Receivable Aging Reports?
To prepare the report, list the customer’s name, the outstanding balance and the time since it has
become overdue. The accounts are classified in categories rather than a specific time listed since
becoming overdue.
The typical categories for this report include:
 Current: Due immediately
 1 – 30 days: Due in 30 days
 31 – 60 days: Due within a month
 61 – 90 days: Two months overdue
 91+ days: More than two months overdue

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The headers of the columns on the report are broken up into date ranges of 30 days and the rows
represent the receivables of each customer. Here’s a sample of accounts receivable aging report:
How to Use Accounts Receivable Aging Report?
1. Organize the report and filter it to see the clients that owe you the most money. Focus on
collecting the highest payments by sending emails or calling the clients.
2. If the receivables are 60 to 90 days past due date and the client is not responding to
reminders, you might have to defer to the next steps such as employing a collection
agency, filing a legal complaint or writing the amount off.
3. Establish a collection system. Sending regular payment reminders, offering discounts for
early payments and emailing the customers their invoices on time can help you get paid
faster.
Reports may be periodic or on demand manual or computer generated and may include
 Consumer statements
 Legislative requirements
 Statistical and financial or management reports
 user reports
Recovery plan and measures to collect monies may include:

 advice to supervisors/managers/legal officers
 dunning/banking letters
 legal action
 letters of demand without prejudice
 letters of notice
 liaison with clients
 plaint
 return of goods
 summons
 third party intervention

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 write-offs
Name: _________________________ Date: _______________
1. What is Accounts Receivable Aging report?

2. Write typical categories for accounts receivable aging report
3. List the recovery plan and measures to collect monies

Score = ___________
Rating: ____________

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Information Sheet 4.2:- Filing documentation
File documentation
Invoices Filing and Record Keeping
The ARA maintains unpaid invoices in the file cabinet with unpaid invoices sorted in folders by
number of days outstanding. At the end of each month, the ARA attaches any late payment
notification letters and any correspondence about the invoice to the original invoice; creating an
“invoice packet.” Then, puts the invoice packet in the correct folder that corresponds with the
number of days the invoice is outstanding. The folders are categorized as follows:
a. 0-30 days
b. 31-60 days
c. 61-90 days
d. 91-120 days
e. 121-365 days
f. Over 365 days
If an invoice is paid, the ARA obtains the invoice from the folder in the file cabinet with unpaid
invoices, attaches any additional documentation (e.g. report showing receipt of payment), and
files the invoice (sorted by month and invoice number) for a minimum of 2 years in the Paid
Invoices File Cabinet. After storing the invoices and reports for 2 years on site, the records are
moved to storage for a period of five additional years.

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Name: _________________________ Date: _______________
1. What are the information maintained in ARA

2. List the types of reports prepared and distributed

Score = ___________
Rating: ____________

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LG #13, LO5: Distribute creditors invoices for authorization
Instruction sheet
 Identifying, investigating and rectifying invoice discrepancies
 Encoding and recording invoices correctly
 Authorizing payment
 Identify, investigate and rectify invoice discrepancies
 Encode and record invoices correctly
 Authorize payment
them.
each LO
sheets”
course or program;

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Information Sheet 5.1:- Identifying, investigating and rectifying invoice
discrepancies
One type of invoice matching validation is invoice totals matching. To specify that the system
should perform invoice totals matching, on the Accounts payable parameters page, on
the Invoice validation tab, set the Match invoice totals option yes.
You can use invoice totals matching to help guarantee that total invoice amounts don't deviate
from expected amounts by more than an acceptable variance. Six totals are compared on
the Invoice totals matching details page. If any one of the totals deviates from the expected
corresponding purchase order total, a matching discrepancy is flagged.
To review the invoice that has the totals matching discrepancies, in the Vendor invoice
entry workspace, click the Pending invoices tile. Then, on the Action Pane, on the Review tab,
click Matching details. If matching discrepancies have been detected, warning icons appear next
to the invoice amount. You can view more detail about the totals by viewing the invoice totals
matching details.
After you identify a discrepancy, you might have to contact the vendor if you think that the
information on the invoice is incorrect. Depending on the resulting agreement with the vendor,
you can then take one of these actions:
 Accept the price difference, and post the invoice that has matching discrepancies. Your
system might be set up to require approval before it can post if there are matching
discrepancies. In this case, you must approve the matching discrepancy and can
optionally enter an approval comment. You can then select to post the invoice.
 Revise the invoice amount to the expected amount, and post the invoice.
 Request a full credit and a new, corrected invoice from the vendor.
Name: _________________________ Date: _______________

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1. What are the actions taken when you identify discrepancies on invoices?

Score = ___________
Rating: ____________
Information Sheet 5.2:- Encoding and recording invoices correctly
The first part of the Accounts Payable (AP) process is receiving an invoice. Once you get an
invoice, there’s a specific process that’s crucial to maintaining accurate financial records.

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Since this process is quite involved, a company might opt to automate this system rather than
process invoices manually. Automation can improve the visibility, productivity, accuracy and
cost-effectiveness of a business’ invoicing process.
The following are steps an Accounts Payable department follows to process an invoice.
Step 1: Verifying and Tracking Information
A purchasing company needs to verify the purchase, ensure correct payment and deliver the
payment within the agreed upon terms. Invoices should include the following information to help
the vendor and purchaser track their expenses or inventory and update their financial records:
 Date the vendor created and sent the invoice.
 Contact information of both the vendor and the purchaser, particularly billing information
and point of contact.
 Purchase details, including product or service details and pricing.
 Payment information.
Step 2: Data Entry and General Ledger Coding
Once the AP staff verifies that the vendor invoice contains all the correct information, they need
to enter the data manually or using automation tool and code it for accounting purposes. General
Ledger Coding refers to a coding system that makes it easier to track debits and credits.
Manually entering this data can take a lot of staff time and carries the risk of human error, which
can be detrimental to a company’s financial records. Using an automated system can reduce
invoice-processing costs by 75% to 85% while decreasing errors at the same time. Having the
tools you need to track this data also improves access to invoice data, which improves the service
to vendors and results in the faster turnaround on payments.
Step 3: Forwarding and Receiving Approval
After an AP department verifies invoice information, it needs to submit the invoice for approval
before they can send a payment. A slow approval process can have a significant payment
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turnaround times and revenue. Paper invoices can sit on a busy employee’s desk or get misplaced
as it is moved around from desk to desk. By using an automated invoice processing system, an
AP department can save time tracking down lost documents or requesting invoice copies from
the vendor.
These solutions digitally capture the data from paper and electronic invoices and put them
through a custom-designed workflow that speeds up the entire approval process. Reducing or
eliminating the need for paper invoices will lower outgoing costs.
According to experts, the cost of a paper invoice can range between $12 to $30 to process with
an average cost close to $15.
While larger companies with a more complex accounts payable process can cost nearly $40 per
invoice. Online automated invoicing cost significantly less at about $3.50 per invoice process.
Automation can save your company hundreds of thousands of dollars per year.
Name: _________________________ Date: _______________
1. Write the steps an accounts Payable department follows to process an invoice

Score = ___________
Rating: ____________
Information Sheet 5.3:- Requesting authorization for payment from appropriate

personnel

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A Payment Request is an internal request for a bookkeeper or Accounts department to draw a
payment. A payment request will automatically be created if the staff member does not have the
ability to create payments.
Payment Authorization is a process through which the amount to be paid on a payment method is
verified.
In case of credit cards, authorization specifically involves contacting the payment system and
blocking the required amount of funds against the credit card. Payment types may or may not
require this authorization step. This is configurable in Sterling Order Management in the sellers
payment rule. If an order requires payment processing, the order is not picked up for scheduling
or other processing until it is authorized.
The Payment Collection time-triggered transaction analyzes an order to create authorization
requests. The Payment Execution time-triggered transaction monitors requests created for
authorization and provides user exits to carry out the authorization. The user exit can process the
authorization request in any one of the following ways:
 Perform synchronous processing to carry out the authorization immediately by
interfacing to an accounts receivable database, and pass back the authorized amount.
 Place a request to try again later if the interface to the payment system is inoperable.
 Request asynchronous processing, which means that Console never contacts the payment
system for this order.
Appropriate personnel to whom authorization for payment would depend on:
 industry and organisation requirements, and may include:
 the board of directors; or
 a designated group from the board of directors such as the executive
Name: _________________________ Date: _______________

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1. Differentiate payment request & payment authorization
2. Write the appropriate personnel to whom authorization for payment would depend
on

Score = ___________
Rating: ____________
Operation Sheet-1:- Invoice processing
Here are the steps for invoice processing:

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1. Capture, general ledger (GL) code, and match supporting documents such as a
purchase order and/or delivery receipt
2. Send invoices to authorized approvers to approve or reject invoices
3. Authorize and submit invoices for payment in a financial system
4. Process invoices for payment via common payment methods such as check, ACH, or
wire transfer
5. Archive invoices and payment information in the GL and for audit purposes

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LG #14, LO6: Remit payments to creditors
Instruction sheet
 Requesting and authorizing Cheque
 Debiting correct account in a timely manner
 Preparing creditors payments
 Request and authorize Cheque
 Debit correct account in a timely manner
 Prepare creditors payments
them.
each LO
sheets”
course or program;

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Information Sheet 6.1:- Requesting and authorizing Cheque
You will want to develop policies regarding who in your organization can authorize payments.
Some organizations designate this function solely to the executive director to ensure that a single
person is paying attention to monies going out of the organization. In other cases, a department
head might authorize purchases for that department, as long as they are within the department's
budget. In most organizations, once the board approves the budget, it does not need to authorize
individual purchases within that budget. However, unbudgeted purchases would require
additional approval. Also, in very small organizations, the board treasurer or board president may
be asked to authorize all purchases. Even larger organizations have policies requiring the board
to authorize significant expenditures, such as purchases for computers or other assets. It is
important to agree and formally define what constitutes a significant expenditure and how these
purchases will be handled.
All disbursements should be accompanied by adequate documentation, in the form of receipts or
an invoice.
There is some debate regarding the number of signatures required on a check. In many cases, it is
useful to require two signatures on checks, especially for purchases over a certain amount. This
amount will vary with the organization's budget; your accountant may be able to help you
determine how much is significant. Even though checks require two signatures, three or four
people might have check signing authority to ensure that two signers are available to make
disbursements. The number of authorized signers should be kept to a minimum, while ensuring
that daily business is not unnecessarily hampered.
The purpose of this internal control is to make sure that there are deliberate decisions made about
who to pay, how much to pay, and when to pay bills. If you habitually have one or more checks
that are pre-signed by one of the two required signatories, it defeats that purpose. If more than
one signer is not regularly available, and this inhibits your ability to meet your obligations, you
might consider having an imprest checking account.

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Check Request Instructions
Purpose
Used to request payment to vendors/companies and individuals, for services rendered,
honorariums, supplies ordered, subscriptions, membership dues, workshop/seminar/conference
registrations, use of facilities, etc.
The Check Request Form can be found on the Business Office page, under “Forms.” The form is
an interactive form; you should complete the form on line and then print it out.
Check Request Form Policy
 All check requests must have supporting documents, such as order forms, registration
forms, invoices, contracts, W9 forms, if applicable, etc.
 All requests need to have the original documentation.
 If a copy needs to be mailed with the check, then a copy of original MUST be attached to
paper work.
 If the check needs to be mailed specifically to someone’s attention, then a pre-addressed
envelope MUST be attached to paperwork.
 Should a vendor require our Tax Exempt Certificate, please indicate that on check
request.
 All checks will be mailed out directly to the payee/vendor from the Accounts Payable
Department. Any exceptions to this will need to be approved.
Honorarium requests need to be submitted with a contract or letter of agreement and a W9
Form along with the Check Request.
Services Rendered requests need to be submitted with a contract or invoice (detailing the
services being performed) from the vendor, a W9 form, and check request.
Do not use this form if a Purchase Order has been written/processed. Submitting a check request
with an invoice when there is an existing purchase order written will duplicate the request.

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Form Instructions
 All data on the Check Request Form should be typed.
 Backup documents such as invoices, registration forms, order forms, contracts, W9
forms, etc. must be attached to the request. Do not attach a statement from a vendor
listing the invoice #, date and amount. The actual invoice showing what was purchased,
cost, and shipping needs to be attached. Incomplete or inaccurate forms will be returned
for correction and resubmission.
Date of Request: Enter the date you are filling out check request.
Dept Name: Enter the department name from which the check request is coming from.
Check Due By: Enter the date the invoice is due to be paid by.
Direct Pay: Check “Y” if the invoice should be paid in full. Check “N” if this is a partial
payment of the invoice.
Hold for Pick up: If check request was approved for pick up, and then enter the person’s name
and extension of who will be picking checkup.
Mail Check: Check “Y” if check is to be mailed; check “N” if check is to be picked up.
Mail Attachment: If check needs to be mailed with certain attachments and documentation
check “Y”, if not then check “N”.
Payee: Enter the payee’s full name and address. Make sure to enter the correct “Remit To”
address.
Vendor ID: Enter the vendor, student, or employee ID number.
Purpose: Document the business purpose for the payment. Examples: Seminar registration
(name of seminar) and the name of the individual(s) attending the seminar; Office supplies,
publications or books (attach the original order form and a copy) and document what the books
or publications are for (teaching or office supplies).
For facility use, please document the term and date(s) for the use and the purpose or for a hotel
stay document the purpose for the stay, dates and the name of the individual(s).
P.O. Number: Enter purchase order number if payment is associated with a purchase order
number.

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Approvals: The originator of the request needs to sign the form and the individual who is
authorized to approve expenses for that budget.
Account Number to Charge: A 16 digit account number MUST be used to charge all expenses
to. You MUST enter the “Fund Code – Department Number – Expense Code – Project Number.”
Any requisition that does not have all 16 digits will be returned for resubmission. If you have
more than one invoice for the same vendor you may use one check request form and may enter
more than one expense account for each invoice. However, each invoice must be listed
separately, even if same expense account is being used.
Invoice No: Enter the invoice number for the invoice being paid. If more than one, list
separately.
Date: Enter the billing date for the invoice.
Check Amount: Enter the total amount requested for each invoice. The document will
automatically total amounts of all invoices entered.
Name: _________________________ Date: _______________
1. Write the purposes to which check is requested

2. What are the controlling aspects in authorizing check

Score = ___________
Rating: ____________

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Accounts & Ledgers
Information Sheet 6.2:- Debiting correct account in a timely manner in
accordance with legislative and compliance requirements
If a company buys goods or services on credit rather than paying with cash, the company needs
to credit accounts payable so that the credit balance increases accordingly.
If a company pays one of its suppliers the amount that is included in accounts payable, the
company needs to debit accounts payable so the credit balance is decreased.
Proper double-entry bookkeeping requires that there must always be an offsetting debit and
credit for all entries made into the general ledger. To record accounts payable,
the accountant credits accounts payable when the bill or invoice is received. The debit offset for
this entry generally goes to an expense account for the good or service that was purchased on
credit. The debit could also be to an asset account if the item purchased was a capitalizable asset.
When the bill is paid, the accountant debits accounts payable to decrease the liability balance.
The offsetting credit is made to the cash account, which also decreases the cash balance.
For example, imagine a business gets a $500 invoice for office supplies. When the AP
department receives the invoice, it records a $500 credit in accounts payable and a $500 debit to
office supply expense. The $500 debit to office supply expense flows through to the income
statement at this point, so the company has recorded the purchase transaction even though cash
has not been paid out. This is in line with accrual accounting, where expenses are recognized
when incurred rather than when cash changes hands. The company then pays the bill, and the
accountant enters a $500 credit to the cash account and a debit for $500 to accounts payable.
A company may have many open payments due to vendors at any one time. All outstanding
payments due to vendors are recorded in accounts payable. As a result, if anyone looks at
the balance in accounts payable, they will see the total amount the business owes all of its
vendors and short-term lenders. This total amount appears on the balance sheet. For example, if
the business above also received an invoice for lawn care services in the amount of $50, the total

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of both entries in accounts payable would equal $550 prior to the company paying off those
debts.
Relevant legislative and compliance requirements may include:

 consumer:
 Trade practice and consumer protection proclamation
 Consumer Credit Code
 competition:
 Trade practice and consumer protection Authority
 prudential:
 Prevention and suppression of money laundering and the financing of terrorism
proclamation.
 Cheques and Payment Orders manuals
 Commercial code of Ethiopia
 Financial Institutions Code
 Financial Transaction Reports manuals
 Income Tax Proclamation
Name: _________________________ Date: _______________
1. How could a company record when goods or services are bought on credit
2. List relevant legislative and compliance requirements

Score = ___________
Rating: ____________

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Accounts & Ledgers
Information Sheet 6.3 preparing creditors payments
A creditor is a supplier or vendor who will normally invoice you for goods or services supplied
to you. Creditor Payments are Payment to your Creditors (Suppliers).
When you receive an invoice you should enter it as a Purchase Invoice, and post it. This updates
the balances in the payables ledger and the general ledger (and possibly the stock). If you are
going to pay the invoice immediately, you can treat it as a straight payment.
When you come to pay the invoice at a later date, you do not need to re-enter it. Instead you
make a special kind of payment, or you can use the Batch Creditor Payments command to pay a
number of invoices. Paying an invoice will adjust your bank account, and also reduce the amount
of money you owe.
Self-check 6.3 fill in the blank
Name: _________________________ Date: _______________
1. __________ is a supplier or vendor who will normally invoice you for goods or services
supplied to you.
2. When you receive an invoice you should enter it as __________

Score = ___________
Rating: ____________

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Accounts & Ledgers
LG #15, LO7: Prepare accounts paid report and reconcile balances outstanding
Instruction sheet
 seeking statements of outstanding balances and reconciliation to invoices received from
suppliers
 seek statements of outstanding balances and reconciliation to invoices received from
suppliers
them.
each LO
sheets”
course or program;

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Information Sheet 7.1:- seeking statements of outstanding balances and
reconciliation to invoices received from suppliers
A supplier statement reconciliation or vendor statement reconciliation involves

reconciling an individual supplier balance in the accounts payable ledger with a
statement submitted by a supplier.
Supplier statements are an important accounting source document regularly issued to the
business by a supplier of goods or services. The statements contain details of all invoices, credit
notes, discounts and payments made on a supplier account according to the supplier. By
reconciling the statement to the supplier’s account in the accounts payable ledger any
discrepancies or errors are revealed.
Invoice reconciliation is the process of matching transactions you’ve entered into

your accounting software with the invoice or statement you receive from your vendor to make
sure the numbers match and your business isn’t paying for something it didn’t receive,
overpaying for a service or even underpaying.
Accounts Payable resources are limited, so the priority is always to process invoices through to
payment on time. Suppliers share the same priority and consume significant AP resources,
following up invoice submission with queries to check invoices have been received and when
they are going to get paid. Paying any suppliers late increases the workload in AP as suppliers
submit duplicate invoices, further queries and ultimately disruption to the business if they put the
account on stop.
All of this leads to Accounts Payable being largely a reactive process, which makes it difficult to
ever free up enough time to be more proactive and drive efficiencies as a result.
Reconciling supplier statements is a key control that enables Accounts Payable to check if all
invoices/credits have been received and if there are any errors on the ledger to resolve in order to
pay suppliers accurately and on time. Reconciliations are all too often done on a reactive basis,
on request by suppliers or when AP recognizes a supplier account needs to be cleared. If
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Accounts Payable could routinely reconcile their top supplier accounts, proactively on a monthly
basis, then all the errors would be resolved before they become an issue - More suppliers will be
paid on time, queries and duplicates will reduce which improves relationships with suppliers and
reduces workload in AP
The process of reconciling statements manually is very time consuming and it’s the first thing to
suffer in a busy AP department, so we cannot reconcile anywhere near the volume of statements
we should be doing. There is no visibility, audit trail or reporting to manage the process, so we
don’t know how many or what types of errors there are, whether they have been followed up and
what the next actions are.
Automating the process would enable a much higher volumes of statements to be reconciled,
significantly improve controls, proactively identify and resolve issues, reduce supplier queries
and gain valuable insights into AP processes to identify where controls could be improved to fix
root cause. Reconciling higher volumes of statements will also ensure profits are maximized
based on the following:
 Ensure all credits are received and applied
 Ensure miss-postings and duplicates are cancelled
 Ensure debit/credit miss-postings are cancelled
 Improve payment on time to reduce supplier queries, being put on stop and improve
relationships with suppliers.
 Reduce supplier queries by sharing reconciliation reports and/or providing access to

invoice status via Statement-Matching.com portal extension.
 Improve cash flow forecasting by identifying missing invoices/credits on a timely basis.
 Prompt clearing of GRNI (Goods Received Not Invoiced) Account

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Accounts & Ledgers
Reconciling supplier statements is a critical control for Accounts Payable to ensure their ledgers
are accurate. In an ideal world, automating the process would enable a much higher volume of
statements to be reconciled, exceptions would be resolved proactively, and more suppliers would
be paid on time.
However, with limited resources and high volumes of invoices, reconciling supplier statements is
all too often neglected and only performed reactively when the supplier’s account is in trouble.
Accounts Payable are simply unable to get through any meaningful volume on a routine basis
which is then compounded by suppliers who, seeking confirmation that their invoice has been
received, then submit further queries and take up more of Accounts Payable’s time. Businesses
that attempt to reconcile statements manually suffer the worst – the process is time-consuming,
tedious and all too often neglected due to the volume of statements to reconcile. Not reconciling
statements or only reconciling for fire-fighting purposes is not the right approach – it pays
dividends to instead be proactive by automating supplier statements when they come in and
focus Accounts Payable user’s time on managing the exceptions. Businesses who are able to
reconcile statements proactively will resolve errors before they become more costly issues
improve deadline performance and reduce supplier queries.
Supplier statement reconciliation should be a straightforward process – and, on paper, it is – but

it is affected by many factors that make the job much harder than it needs to be. There simply
isn’t enough time in a day for an average-sized AP department to reconcile meaningful volumes
of statements. Many AP departments are snowed under trying to process invoices through to
payment on time and only reconcile statements when the account is close to or on stop.
This assumes all members of your Accounts Payable team are proficient in Excel. Manual
statement reconciliation is tedious and unpopular; consequently, it tends to be the first task that
gets pushed to the bottom of the agenda during busier periods.
Across manual statement reconciliation is also a complete lack of accountability. AP

departments who are struggling to reconcile a significant number of statements tend to miss

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things, fail to keep complete and accurate records, pass workloads around, and generally lose
track of who is doing what.
Few Accounts Payable departments keep an audit trail to track issues, and even fewer employ
management reporting to identify what might have caused those issues.
While all of these problems can be resolved as encountered, continued errors on critical supplier
accounts and sporadic mistakes can be equally difficult to locate and resolve. This can be
compounded through the volume of your transactions, knowledge loss due to staff turnover, or
lacking a mechanism to prevent or address these issues.
Repeat errors with the same suppliers could eventually even result in loss of business or even
production that will affect delivery of goods to customers.
Reconciling the supplier account ensures supplier balances are accurate for financial reporting
and profits are maximized by ensuring no credit notes are missing or invoices duplicated.
In principle, the process for reconciling supplier accounts is very straightforward. The supplier’s
credit control department sends a statement of account, which contains the unpaid invoices on
their sales ledger, to the buyer’s accounts payable department. The accounts payable team at the
buying organization compares the statement to their accounts payable ledger(s) to identify any
differences.
Accounts payable time pressures
The challenge arises because accounts payable teams already have a full schedule managing the
day-to-day activities of processing invoices through to payment.
This is exacerbated by the fact that supplier statements are in paper or PDF-based formats, and
can include thousands of transactions. To identify exceptions, the accounts payable team needs
to manually check details on the accounting system of every transaction listed. It can take hours,
and sometimes days, to reconcile one vendor.

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The result is that organizations do not find it practical or possible to reconcile every supplier, and
therefore focus their time on their largest suppliers to ensure that they are paid on time.
This avoids disruption in supply chains and ensures liabilities are accurate for cash flow
forecasting and financial reporting. But, it means they are potentially denting their profits due to
errors going unidentified on statements.
Self-check 7.1 Written Test
Name: _________________________ Date: _______________
1. What does it mean by supplier statement reconciliation?

2. What are the benefits of reconciling supplier statements?
3. What will happen if there is discrepancy between the total amount on the statement and the
total amount due to vendors?
Note: Satisfactory rating - 30 points Unsatisfactory - below 20points

Score = ___________
Rating: ____________

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Accounts & Ledgers
Operation Sheet-1:- Supplier Reconciliation Process
A typical four step process for carrying out supplier statement reconciliation is as follows.
Step 1: Agree the Opening Balance
The starting point for the supplier statement reconciliation is to agree the opening balance shown
on the supplier statement with the opening balance on the accounts payable ledger account for
the supplier.
Step 2: Agree this Periods Entries
All the items which appear on both the supplier statement and on the supplier’s account in the
accounts payable ledger should be marked with a tick mark. These items can now be eliminated
from the reconciliation process.
Step 3: Allocate Credit Notes and Payments
All credit notes and then payments shown on the supplier statement should be allocated against
invoices.
Step 4: Differences
All remaining items not eliminated in steps one to three above represent either items on the
supplier statement not in the accounts payable ledger, or items in the accounts payable
ledger not on the supplier statement. These items will form the basis of the supplier statement
reconciliation.
Supplier Statement Reconciliation

Item Amount
Supplier statement balance xxx
Payment in transit (xxx)
Invoice not recorded in ledger (xxx)
Credit note not recorded in ledger xxx
Accounts payable ledger balance xxx

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Lap test :- Practical Demonstration
Name: _____________________________ Date: ________________

Instructions: You are required to perform the following individually
Suppose a business receives a statement from a supplier showing a balance of $1,800. On

checking the supplier account in the accounts payable ledger the balance is shown to be $1,370.
The business has agreed the opening balances (step 1), and marked off the items shown on both
the statement and the ledger account (step 2), and has identified the following unreconciled
items.
1. A recent payment of $200 has not been recorded by the supplier.
2. An invoice for $350 has not been recorded on the accounts payable ledger
3. A credit note for $120 has not been recorded on the accounts payable ledger.
Required: Prepare Supplier Statement Reconciliation

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Accounts & Ledgers

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Admas University

Account and Budget Support Level III

TVET Program Title- Account and budget Version -1

Accounts Receivable Process

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

Receipts Entry Process

Receipts may include

Self-check 1.1 written test

Name: _________________________ Date: _______________

1. What are receivables?

Note: Satisfactory rating - 5 points Unsatisfactory - below 5 points

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

All invoices require a sales order to be entered first.

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

Payments received from customers are therefore entered in a two-stage process:

TVET Program Title- Account and budget Version -1

E.g banked 1212 local, in customer's currency this was 400.

Rate is 400/1212 = 0.330033

Self-check 1.2 written test

Name: _________________________ Date: _______________

TVET Program Title- Account and budget Version -1

Information Sheet 1.3:- Identifying & Investigating discrepancies between monies

Receipts - Payment Method

TVET Program Title- Account and budget Version -1

Receipts - Allocating to Invoices

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

Self-check 1.3 Written Test and fill in the blank

Name: _________________________ Date: _______________

Note: Satisfactory rating - 3 and 5 points Unsatisfactory - below 3 and 5 points

 How to review the account receivable process effectively

TVET Program Title- Account and budget Version -1

TVET Program Title- Account and budget Version -1

Establish monthly contact with your client

5. Accounting for accounts receivable

Record for sales on credit of services

Lap test :- Practical Demonstration

Name: _____________________________ Date: ________________

Time started: ________________________ Time finished: ________________

1. Create a group consisting 5 individuals assign each members tasks as follow:

TVET Program Title- Account and budget Version -1

LG#10, LO2: Identify bad and doubtful debts

TVET Program Title- Account and budget Version -1

Information Sheet 2.1:- Reviewing debtor’s ledgers

TVET Program Title- Account and budget Version -1

Debtors' subsidiary ledger

The debtors' subsidiary ledger is a sub-system in the overall accounting system.

TVET Program Title- Account and budget Version -1

Self-check 2.1 fill in the blank

Name: _________________________ Date: _______________

TVET Program Title- Account and budget Version -1

Information Sheet 2.2 verifying bad or doubtful debt

Name: ___________ Date: _

Name: ___________ Date: _

Name: ___________ Date: _

Name: _____________ Date:

Time started: ________ Time finished:

Name: ___________ Date: _

Name: _____________ Date:

Time started: ________ Time finished:

Name: ___________ Date: _

Name: ___________ Date: _

Name: ___________ Date: _