A

Dissertation Report
On
ACCOUNTS PAYABLE INVENTORY.

By

AJINKYA KISHOR BHOSALE

Under the guidance of

Dr. Amey A Choudhari

Submitted to

Savitribai Phule Pune University

In partial fulfillment of the requirement for the award of the degree of

M.B.A

Batch – 2021 TO 2023.

Through

JSPM’s Rajarshi Shahu College of Engineering – Tathawade, Pune - 411033

1
 DECLARATION OF STUDENT

(CERTIFICATE OF ORIGINALITY/DECLARATION)

This is to declare that I have carried out this project work myself in partial fulfillment of
the MBA Program of Savitribai Phule Pune University.

The work is original, has not been copied from anywhere else and not been submitted to any
other University/Institute for an award of any degree/diploma.

Date Signature

Place Name:

2
 DECLARATION OF GUIDE

This is to certify that the work incorporated in this Project Report “ACCOUNTS PAYABLE
INVENTORY submitted by AJINKYA KISHOR BHOSALE is his original work and completed under
my guidance. Material obtained from other sources has been duly acknowledged in the Project
Report.

DATE SIGNATURE OF GUIDE

PLACE

3
 ACKNOWLEDGEMENT

With Candor and Pleasure I take opportunity to express my sincere thanks and obligation to my
esteemed guide Dr. Amey A Choudhari. It is because of his able and mature guidance and co
operation without which it would not have been possible for me to complete my project.

Finally, I gratefully acknowledge the support, encouragement & patience of my family, and as
always, nothing in my life would be possible without God, Thank You!

AJINKYA KISHOR BHOSALE

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 TABLE OF CONTENTS

CHAPTER CONTENTS PAGE NO

Declaration of student Declaration of Guide 3

Acknowledgement 4

Table of Contents 5

List of Tables 6

List of Figures 7

1 Executive Summary 8

2 Company Profile 18

3 Research Methodology 23

4 Theoretical Concepts 25

5. Data Analysis and interpretation 44

6. Findings 59

7. Recommendations 61

8. Conclusion 62

References 63

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 LIST OF TABLES

Table 1 Requirement...........................................................................................................33
Table 2 credit and debit note ...............................................................................................33
Table 3 Work span PO ........................................................................................................34

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 LIST OF FIGURES

Figure 1 Cash vs Inventory..................................................................................................15

Figure 2 Inventory payable..................................................................................................20
Figure 3 Balance sheet.........................................................................................................22
Figure 4 balance sheet demo................................................................................................23
Figure 5 cost of goods..........................................................................................................23
Figure 6 Inventory purchase.................................................................................................24
Figure 7 Quotation...............................................................................................................27
Figure 8 Quotation 1 ............................................................................................................28
Figure 9 Purchase order.......................................................................................................29
Figure 10 Input of machines receipt ......................................................................................30
Figure 11 Payment...............................................................................................................31
Figure 12 Inspection receipt................................................................................................32
Figure 12 Pie chart...............................................................................................................33
Figure 12 Pie chart...............................................................................................................33
Figure 13 Accounts Pie chart ..............................................................................................34

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 CHAPTER – 1

EXECUTIVE SUMMARY

OUTLINE OF THE STUDY

To Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a
company's balance sheet. It is distinct from notes payable liabilities, which are debts created by
formal legal instrument documents. An accounts payable department's main responsibility is to process
and review transactions between the company and its suppliers and to make sure that all outstanding
invoices from their suppliers are approved, processed, and paid. The accounts payable process starts with
collecting supply requirements from within the organization and seeking quotes from vendors for the items
required. Once the deal is negotiated, Purchase order are prepared and sent. The goods delivered are
inspected upon arrival and the invoice received is routed for approvals. Processing an invoice includes
recording important data from the invoice and inputting it into the company's financial, or bookkeeping,
system. After this is accomplished, the invoices must go through the company's respective business
process in order to be paid.

OBJECTIVE OF STUDY.

To Accounts payable department is responsible for many influential factors that contribute to the overall
financial well-being of an organization because it oversees the flow of money out of the organization.
Accounts payable objectives include making timely vendor payments, maintaining accurate data, nurturing
positive relationships with suppliers, and researching ways to save money and improve the bottom line. All
of these objectives help guide the overall accounts payable process.

SCOPE OF STUDY.

To Accounts payable are a company’s short-term liabilities. Companies that use accrual basis accounting
have accounts payable, or money the company owes its vendors and suppliers, and accounts receivables
(AR), or money it is owed by its customers.

Accounts payable are represented on the company’s balance sheet, the snapshot of a company’s financial
health. They are listed on the right-hand side under “current liabilities.” Liabilities are listed according to
when they are due to be paid. Accounts payable are listed first because they typically need to be paid
within given days.

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 NEED OF THE STUDY.

To Accounts payable (AP), or "payables," refer to a company's short-term obligations owed to its creditors
or suppliers, which have not yet been paid. Payables appear on a company's balance sheet as a current
liability.

Another, less common usage of "AP," refers to the business department or division that is responsible for
making payments owed by the company to suppliers and other creditors.

Accounts payable can be compared with accounts receivable.

Accounts payable (AP) are amounts due to vendors or suppliers for goods or services received that have
not yet been paid for.
The sum of all outstanding amounts owed to vendors is shown as the accounts payable balance on the
company's balance sheet.
The increase or decrease in total AP from the prior period appears on the cash flow statement.
Management may choose to pay its outstanding bills as close to their due dates as possible in order to
improve cash flow.

LIMITATION OF STUDY

Accounts payable are the amounts a business owes its suppliers for purchases made on credit. Accounts
payable payment period measures the average number of days it takes a business to pay its accounts
payable.
This measure helps you assess the cash management of your small business, but you should be aware of
some of its limitations.

Calculation Example

Overlooks Discounts

Isolated Information

Misses Non-Financial Factors

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 CHAPTER-2
COMPANY'S PROFILE.

VEDANT ENTERPRISES was establish in 2009 and have work with many MNC's and International
company's for serving the for more than 10 years.

VEDANT ENTERPRISES has been taking a leading role in providing construction services and fire
fighting services with an uncompromised commitment to Quality, Health, Safety, and Environment. We
do this through the combination of an open relationship with our employees based on mutual trust,
transparency, accountability, and discipline.

In preparation to meet the growing market demands for diverse construction, VEDANT ENTERPRISES
has heavily invested in employing a highly qualified management team and staff to meet standards and has
purchased state-of-the-art equipment to participate in upcoming, challenging large-scale projects.

Being proud of our achievements, we will continue to further enhance our commitment and capabilities in
the construction industry with integrity, and strive for business excellence.

About VEDANT ENTERPRISES

Our is a fastest growing company in the field of Civil Engineering and fire fighting, in
construction services and fire fighting with many company and have a full proper work of
maintenance handling plants and Hiring of heavy earth moving equipment/machinery.

Prior to change over to the present name of Vedant Enterprises. MR. Sachin Bhosale &
Jeevan Jadhav ‐ Managing Director of the company, was the sole proprietor from the year
2009. In this block of years, MR. Sachin Bhosale & Jeevan Jadhav had carried out various
construction jobs under his own direct supervision and personal control. The works include
earthwork for GE India Pvt Ltd, canal lining works, river and canal protection works with
self‐owned machinery. Important works of Hydel Projects, intricate concrete structures, etc
. were executed gaining rich experience in canal construction works, plants aqueducts
industrial & residential buildings.

Several works worth Crores of Rupees have been executed under this name and style i.e.
Vedant Enterprises. We expanded our field from irrigation works to the construction ,
Paver finisher and other relevant machinery required for Civil Works.

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We have the capacity to mobilize manpower and equipment for all kinds of civil works of
any magnitude. We have our own fleet of heavy earth moving equipment construction as
well as heavy earth moving equipment.

We are assisted by a team of qualified and experienced engineers who are well‐ versed in
the execution of all kinds of civil engineering projects, with a stubborn commitment to
quality and project schedule to the entire satisfaction of all our esteemed clients/consultants
both national and international

Our HSE Policy is project oriented. We strive to achieve and meet HSE requirements
of our clients in both Public as well as Private sectors during project implementation.

In recognition of our safe construction practices, Lost Time Accident Free (LTA free) Site
Management during past 15 years, we enjoy a preferential treatment from our clients
through repeat orders.

We are conscious of our responsibility towards mother earth and environment. We work in
an e-environment while encouraging our employees and other associates to minimize use
of paper and optimize carbon emission through sensible use of fuel and power in our
operations.

We strictly adhere to HSE compliance enforced by Statutory Authorities under Central as

well as State Governments from time to time

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 Chapter-3
Research
Methodology

Research Plan

For effective Research planning, small businesses and large corporations alike rely on balance sheet
forecasting (sometimes called financial modeling). Estimating your future revenue and expenses provides
useful insights for financial planning and helps insulate your business against potential disruptions, as well
as factors such as seasonality.

One of the most important balance sheet items is accounts payable (AP). Representing your short-term
liabilities (usually paid off within a year or less), accounts payable need to be accurately forecast in order
to ensure not only the accuracy of your financial statements, but a clear picture of the amount of cash you
have available for growth and innovation as well as paying your debts.

Research problem Statement.

Half of invoices are still sent manually. The resulting errors and delays in processing can lead to payments
that are either late, incorrect, duplicated or missed entirely.

Inefficient, paper-based AP is not only time-consuming, it can also throw off financial forecasting because
it deprives the company of data on spending patterns to use for budgeting, scenario and supply chain
planning and other analysis. Slow AP can erode supplier goodwill and cause vendors to shorten your
payment terms, lower their delivery or service standards or otherwise downgrade the relationship

This are some problems that occurs while time

 Slow processing

 Matching errors

 Exception invoices and manual follow-up:

 Unauthorized purchases

 Fraud and theft:

 Paying invoices before a service or product is delivered

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  Disappearing invoices

 Double payment

Research design

A company's total accounts payable balance at a specific point in time will appear on
its balance sheet under the current liabilities section. Accounts payable are obligations that
must be paid off within a given period to avoid default. At the corporate level, AP refers to
short-term payments due to suppliers. The payable is essentially a short-term IOU from
one business to another business or entity. The other party would record the transaction as
an increase to its accounts receivable in the same amount.

AP is an important figure in a company's balance sheet. If AP increases over a prior period,

that means the company is buying more goods or services on credit, rather than paying
cash. If a company's AP decreases, it means the company is paying on its prior period
obligations at a faster rate than it is purchasing new items on credit. Accounts payable
management is critical in managing a business's cash flow.

Sample size calculation

The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at which a
company pays off its suppliers.

Accounts payable turnover shows how many times a company pays off its accounts payable during a
period.

Accounts payable are short-term debt that a company owes to its suppliers and creditors. The accounts
payable turnover ratio shows how efficient a company is at paying its suppliers and short-term debts.

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Accounts Payable Turnover Ratio

The AP turnover Ration formula

AP Turnover = TSP/(BAP + EAP)/2

where

AP=Accounts payable

TSP=Total Supply Purchases

BAP=Beginning accounts payable

EAP=Ending Accounts payable.

Dependent & independent Variable

Business can be defined in many ways. But one thing is clear; businesses are judged and valued by
numbers. Businesses are measured and compared in with prescribed numerical measures. Certainly we
look at Profits, Share Price, and Revenues on the macro level. We then break these major measures into
smaller or component measures such as Cost of Goods Sold (COGS), Gross Margin, Accounts
Receivable, Accounts Payable, Cash, Inventory, and Working Capital. Then to compare businesses no
matter their size, there are ratios that put them all on an even footing.

Here we tend to divide other numbers by sales and express them as a percentage of sales. Consider,
COGS, Inventory, Warehousing Costs, Transportation Costs, Accounts Payable, Cash, Accounts
Receivable, and Profit all expressed as a percent of sales. Inventory Turns and Days coverage are
calculated and compared across divisions or companies. Another measure expressed in days is Cash
Cycle.

Demand Casteris concerned about inventory; we look at Inventory, Inventory Turns, Days Coverage and
Inventory as a percentage of Sales. Recently we began looking at how the inventory measures might be
correlated to other measures. We think we know that inventory is correlated to Cash and Profits.

We looked at about forty companies, including the manufacturing firms of the Dow Jones; we collected
data from their income statements and balance sheets.

14
 We were surprised to find very little correlation between cash, profits, and inventory across these
companies.

We speculated other relationships and again were surprised that there were no compelling correlations
with inventory.

OK maybe profit is not a real surprise. But cash? Inventory performance and cash should be closely
related. The general thinking is that more inventory means less cash and vice-versa.

It seems intuitive but as a percentage of sales, it is just not the case. The graph below looks truly random
and an R2 of .03 is not compelling.

fig.1

Once one optimized inventory and service, then the old thinking was right: To improve
service, more inventory is required. The key here is IF inventory and service are already

optimized.

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 Chapter-4
Theoretical Concepts

Relationship Between Accounts Payable and Inventory

For a business to manage its financial position effectively, it must pay close attention to the levels of
accounts payable and inventory on its balance sheet.

Making sure that you pay suppliers on time could help you to acquire supplier credit to purchase
additional inventory. Keeping track of inventory turnover ensures that the business does not run into a
credit crisis.

Inventory and Credit

Both accounts payable, and inventory are listed on a business's balance sheet. Even though inventory is a
cost, it falls under assets on the balance sheet.

Accounts payable to purchase the inventory is shown as a liability on the balance sheet. Together, the
assets and liabilities show the business's financial standing on a day-to-day basis.

It shows how well you are managing your inventory and which supplier may be inclined to provide
additional credit for more inventory because of satisfactory payments.

Payables to Inventory Ratio

A business may extend credit terms to its clients for customer flexibility. To help a business manage its
payments, a supplier may provide credit terms, which may allow a business to pay for its inventory over a
period of weeks.

A business can calculate its inventory and payables ratio by taking the ending accounts payable from
inventory purchases against the inventory at the end of the accounting period.

If the inventory is too high, the business may need to take steps to boost sales.

Inventory and Payables Management

A business should keep a close watch on both accounts payable and inventory. Inventory can tie up
money.

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 If a business is investing too much money in inventory that is not turning over, the lack of sales revenue
can put the business in the position of not being able to pay its accounts payable to its supplier according
to the agreed terms which could result in the loss of a supplier or a poor credit rating.

Inventory and Collateral

A bank is another avenue for inventory financing. As an example of seasonal inventory, a seasonal
business may have a high demand for lawn mowers during the summer season.

Against the business purchase orders, a bank may agree to provide capital so that the business can
purchase lawn mower inventory.

The accounts payable to the bank would have a stipulation stating that the owner repays the bank from the
sale of the lawn mowers.

With collateral on the inventory, a bank will usually finance inventory if the business can justify paying
the account within 90 days or another agreed-upon term.

Factor Inventory

When a business factors its inventory, it sells pending purchase orders for a discount to generate cash
flow to purchase inventory from its suppliers.

This is often done when the business needs working capital immediately to buy the necessary inventory to
fulfill the purchase order.

The factoring company pays the company 70 to 95 percent of the purchase orders upfront and then the
remaining 5 to 30 percent, less the factoring fee, after receiving payment on the purchase order. The
factoring fee typically runs around 3 to 5 percent

Finding A Factor

The first step in the process is to find a reputable factoring company. Many companies that provide
accounts receivable factoring, a more common type of factoring, also provide inventory or purchase order
financing. Normally, traditional banks do not offer these services, but some may provide a referral if you
have a banking relationship.

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Inventory factoring is more expensive than a bank loan and is typically pursued if a bank loan is not an
option.

Qualifying And Verifying

To start the factoring process, you need a purchase order from a reliable customer. The factoring
company verifies the purchase order, making sure it is legitimate and that your customer is likely to pay
once the order is delivered.

After it verifies the order, the factor advances you the cash, usually within 24 to 48 hours, for the needed
inventory to fulfill the order. The advance may or may not cover the whole purchase, but it should take
care of a large portion of it.

The percentage of the advance depends on variables, such as the amount needed, the kind of inventory
purchased from your supplier and the creditworthiness of your customer.

Collecting Payment

After you receive the inventory and fulfill the purchase order, the factoring company collects payment on
the invoice from the end customer and remits payment to you, less the factoring fee.

Businesses factor for various reasons. They may need immediate cash flow to buy inventory and keep
their business growing. They may need inventory to fulfill a large order from a customer and can't qualify
for a traditional bank loan to purchase inventory.
Perhaps they don't want more debt on their books. It is important to keep in mind that factoring is not a
loan; you actually sell your purchase order and assign it to the factoring company.

So the collecting of payments becomes the factoring company's responsibility, and you don't have to put
your staff or resources toward collecting the payments.

Inventory payables can be broadly defined as amounts owed by a business for inventory purchases that
have been incurred but have not been paid as cash at a point in time.

Inventory payables are generally treated as liabilities on a business's balance sheet.

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The inventory payables module calculates closing balances and cash payments for a designated number of
inventory payable liability categories, based on either assumed creditor days or assumed closing balances.

In most cases an inventory payables module simply calculates the inventory payable closing balances and
movement in inventory payable and links out inventory payable closing balances to a balance sheet
module and the movement in inventory payable to a cash flow statement module, as shown below:

fig.2

Precedent & Dependent Modules

Precedent Modules

The precedent modules of an inventory payables module are determined by the functionalities included
within it – e.g. an inventory payables module which calculates inventory payables based on creditor days
may have a precedent inventory module.

The table below provides some common examples of precedent modules of the inventory payables
module:

Dependent Modules

The dependent modules of an inventory payables module are determined by the functionalities included
within its potential dependent modules, although generally an inventory payables module will link out to
a balance sheet module and a cash flow statement module only.

The table below provides some common examples of dependent modules of the inventory payables
module:

Precedent Module Commentary

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Inventory If inventory payables are calculated based on inventory purchases, such as assumed
creditor days, links in to the inventory payables module from available inventory
modules can be used.

Dependent Module Commentary

Balance Sheet The closing balance of inventory payable is a potential item within a balance sheet.

If there are timing differences between when inventory purchases are incurred and
when cash for inventory purchases is paid, the inventory purchases that have not
been paid as cash become an inventory payable liability on the balance sheet.
Linking in the inventory payables module into a balance sheet module will increase
the inventory payable on the balance sheet by the amount of inventory purchases
incurred and decrease by the amount of cash payments during a period.

Cash Flow Statement If there are timing differences between when inventory purchases are incurred and
when cash for inventory purchases is paid, the movement in inventory payable
drives the amount of cash payments on the cash flow statement.

A cash flow statement module will reflect the amount of cash payments by adding
the movement in inventory payable from the start of the period to the end of the
period to the amount of cost of goods sold and the movement in inventory during
the same period. Linking in an inventory payables module to a cash flow statement
module will allow the cash flow statement module to reflect this by showing a
decrease in cash payments when there is an increase in inventory payable (all other
factors remaining constant).

Financial Statement Impacts

Direct Financial Statement Impacts

The inventory payables module directly enters both the balance sheet and the cash flow statement.
Inventory payables are usually recorded as current liabilities on the balance sheet, and increases in these
current liabilities result in additional cash as they are effectively delaying the payment of inventory

20
purchases until a future period (hence they are recorded as an operating cash inflow on the cash flow
statement).

Conversely, a decrease in inventory payable reflects the cash payment of previously recorded inventory
purchases and leads to a decrease in cash.

The direct financial statement impacts of the inventory payables module are summarized in the financial
statement impacts schematic shown below:fig.3

The financial statement impacts schematic shown above does not take into consideration inventory and
cost of goods sold modules upon which the inventory payables are based.

This is not realistic because it is rarely possible for an inventory payables liability to be created without
first having recorded inventory on the balance sheet.

The financial statement impacts schematic shown below includes the impacts of the related cost of goods
sold and inventory on the financial statements, and provides a more realistic summary of how an
inventory payables module (when combined with a cost of goods sold module and inventory module)
impacts the financial statements:

Inventory Payables Module

Financial Statement Impacts (Including Cost of Goods Sold & Inventory)

21
 fig.4

As shown in this schematic, the inventory payables module can be viewed as a module that adjusts the
cash payments in each period (which are assumed to equal cost of goods sold when linked into the
income statement and cash flow statement from cost of goods sold module, plus movements in inventory
from an inventory module) to allow for both cash payments from inventory purchases incurred in
previous periods and inventory purchases not paid as cash in the current period.

The net result of the analysis undertaken within the inventory payables module is the creation of a current
liability on the balance sheet and a corresponding adjustment to cash payments on the cash flow
statement.

Indirect Financial Statement Impacts

The inventory payables module does not have any indirect impacts on the financial statements.

Examples

Inventory Payables Module – Cost of Goods Sold Example

An inventory payables module may link in inventory purchases from an inventory module, which in turn
calculates inventory closing balances based on cost of goods sold projections linked in from a cost of
goods sold module.

In this way, changes in cost of goods sold assumptions are reflected by changes in inventory payables
outputs, as shown below:

fig.5

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Inventory Payables Module – Financial Statements Example

An inventory payables module may include inventory purchases that are linked in from an inventory
module as a basis for calculating inventory payable closing balances.

Once inventory payables balances are calculated in the inventory payables module, they are linked out to
the balance sheet module and movements in the inventory payables closing balances are linked out to the
cash flow statement module, as shown below :

fig.6

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 CHAPTER 5-
DATA ANALYSIS &
INTERPRETATION

Procurement and purchasing are often used interchangeably, but they are two distinct processes.
Procurement refers to the entire process of acquiring goods or services, while purchasing specifically
refers to the act of buying the goods or services.

The procurement process typically involves the following steps:

Identify the need: The procurement process begins when an organization identifies a need for a good or
service.

Define the requirements: The organization then determines the specific requirements for the good or
service, including quality, quantity, delivery timeline, and budget.

Identify potential suppliers: The organization researches and identifies potential suppliers who can
provide the required goods or services.

Evaluate suppliers: The organization evaluates the potential suppliers based on various factors, including
quality, price, delivery timelines, and reputation.

Negotiate contracts: The organization negotiates contracts with the chosen supplier, including pricing,
delivery timelines, and terms and conditions.

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Manage the relationship: Once the contract is signed, the organization manages its relationship with the
supplier, ensuring that the supplier meets the agreed-upon terms.

PURCHASE PROCESS

REQUISITION

AUTHORIZATION

PURCHASE ORDER

RECEIPT INSPECTION OF GOODS AND SERVICES

INVOICE PROCESSING

RECORD KEEPING

25
The purchasing process is a subset of the procurement process and involves the following steps:

Requisition: A request is made to purchase goods or services.

Authorization: The request is approved by the relevant authority.

Purchase order: A purchase order is created and sent to the supplier.

Receipt and inspection of goods or services: Upon delivery, the goods or services are inspected to ensure
they meet the agreed-upon standards.

Invoice processing: The supplier sends an invoice, which is reviewed and paid by the organization.

Record keeping: All documents related to the purchase are recorded and stored for future reference.

Overall, the procurement process involves a broader set of activities, while purchasing is more focused on
the actual act of buying the goods or services.

26
This are the process and Research,steps.

fig.7

27
fig.8

This is Offer send by party and this is offer letter.

28
fig.9

This is letter of PO (Purchase Order)

29
fig.10

Here is in and out of material and working hours.

30
 fig.11

This is first half the payment done by company.

31
Fig no 12.

Receipt inspection of crane.

32
IF ANY QUOTATION HAS TO PASS FOR ANY REQUIREMENT IN WHICH HOUSE IT WILL PASS
70% 30%

IN HOUSE -70%(1) OUT HOUSE -30%(2)

1
2

IF CREDIT AND DEBIT NOTE IS ISSUED BY VENDOR/CUSTOMER THEN THEY WILL PASS PAYMENT ON GIVEN ERIOD
OF SPAN.
50% 50%

1
2

33
AFTER PASSING PURCHASE ORDER IN HOW MANY DAYS ITS HAS TO PASS THEIR BILLS.
ITS DEPEND UPON WORK LOAD
AMOUNT DAYS
1000-25000 2-3 DAYS
25000-100000 7-4 DAYS
100000-10000000 15 DAYS -3 MONTH
ABOVE 1 CR 3 MONTH TO NMORE THAN 1 YEAR.

The term "Data" which was used a few decades ago was generally structured data and
most of them were human-generated. However, currently, the way technology has taken
over most aspects of the business, the data has become more heterogeneous and more
unstructured.

Data analysis plays a very important role with the objective of drawing a meaningful
conclusion from heterogeneous data. Larger audit firms and increasingly smaller audit
firms utilize data analytics as part of their client offering to reduce risk and add value to
the clients.

For auditors, the main driver of using data analytics is to improve the quality of the audit.
It helps in a better understanding of the organization and better-identifying risks. It helps
in generating audit programs that address the client-specific risks thus allowing auditors to
be more timely and efficient in arriving at the results .

In this article, we would discuss two important areas where the auditors need to
concentrate:

a. Accounts Payable (1)

b. Accounts Receivable(2)

34
 1
2

During the process study, it is vital to review the controls around the process.

For example, in the case of Accounts Payable, it is important to understand whether the
client is procuring the right products, at the right price, at the right time from the right
vendor.

The following could be a potential risk in ACCOUNTS PAYABLE.

Risk Implication

Payments are made to the unauthorized supplier----------Unauthorized suppliers could

represent former supplier that supplied goods or services which were unacceptable and
blocked in the supplier list. OR They could be fictitious suppliers.

Payments are made to individuals or employees----------Payments are made to individuals

or employees could represent a diversion of the company’s payment indicating fraud

Unauthorized premiums are given to a supplier----------Unauthorized premiums may

represent overpayments to suppliers in return of any undue favor.

Invoices are paid---------- late Delays in processing accounts payable approval can result
35
in a loss of available discounts for timely remittances and understatement of liability in a
particular period.

Invoices are processed twice---------- Duplicate payments can result from failure to
cancel documents to prevent re-use or processing errors in Accounts Payable such as
restoring a backup file twice.

Payments are made in a way that may not be detected in audits----------Perpetrators of

fraud may arrange payments to avoid detection.

For example, a large amount may be split into several smaller payments to coincide with
the perpetrator's transaction approval limit to avoid limit checks of larger payments

DATA ANALYSIS

1. Stratify the size of payments and extract any exceptionally high payments.

2. Analyze the payment days and identify suppliers with favorable payment terms.

3. If the computer system captures the approving authority for a transaction, examine the
distribution of each manager.

4. Review the terms with vendors and verify the favorable terms with vendors

5. Review the transactions at or near spending authorities.

Testing of exceptions

1. Identify the payments made to unauthorized suppliers by matching the payments and
authorized supplier list

2. Test for large discounts

36
3. Test for duplicate invoices using value and supplier code as key fields for one test
purchase order number for another.

4. Identify the payments made on Sundays and other days that are not valid

5. To find if amounts are being approved at or just below the break-up point in authority
level by a value distribution across the whole ledger.

6. Look for the splitting of invoices to enable the approval by the fraud perpetrator.
Extract all invoices within 90% of the approved limit and search for all the invoices from
that supplier.

7. Sort the data by approval manager, department, and date to identify possible splits of
invoices or summarize payments by an invoice number and find how many partial
payments have been done for each invoice.

8. Test of large one-off payments to the supplier

9. Test for suspected duplicate supplier name

10. Test for incomplete or unusual supplier details

Following are the potential risk in ACCOUNTS RECEIVABLES

Risk Implication

Accounts receivables ledgers are incorrectly consolidated or summed----------Items could

be omitted. The Accounts receivable statement may be overstated or understated
depending on the direction of error.

Credit may be granted to customers who are likely to default----------The business may
sell goods to the customers from which they will not be able to recover the amount. This
has potential implications for liquidity and bad debts

Customers are double billed----------Double billing results in an overstatement of revenue.

It can also impact customer satisfaction.
37
Accounts receivables are invalid or incorrectly stated----------Accounts could be entirely
or partially invalid. Fictitious accounts could result in fraud.

Improper allocation of credits and payments----------Improper allocation of accounts may

result in improper information and assessment

Ageing of accounts receivables may not be proper---------- If the ageing of accounts

receivables is not correct, management may fail to take timely action for the over due’s
accounts.

Improper classification of the amount----------Results in a distortion of the information

and may hamper the decision-making process

DATA ANALYSIS

1.Profile the debtors using stratification to see the number of large debts and what
proportion of value is in large numbers.

2.Identification of old / non-moving items through ageing analysis

3.Identify large balances either in their own rights or compare the same with turnover

4.Report credit balances

5.Identify unmatched cash or credits

Testing of Exceptions

1. Test the items with invoice dates or numbers outside the expected range.

2. Compare the balances with credit limits and report the exceptions

3. Identify partial payment of debts

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 4. Identify invalid transaction types

5. Test the duplicate invoices

6. Verify the vendor master to review the same ID assigned, same vendor name to two
different vendors, payment of the same invoice number

7. Comparison of the customer balance with its turnover

8. Compare the vendor ledger to accounts payable

9. Comparing the inventory records with the sales made

Chapter-6
Learning of
students(findings)

Proper record-keeping is essential: Maintaining accurate records of accounts payable and inventory is
crucial for any business.

It helps in ensuring that the company can manage its cash flow effectively, avoid overstocking or under
stocking, and make informed decisions about its financial position.

The timing of payments matters

The timing of payments can impact the company's cash flow. Early payment discounts can help a
company save money, while late payments can result in penalties and damage the company's reputation
with its suppliers.

Efficient inventory management is crucial

A company must maintain an optimal inventory level to avoid excess inventory that ties up capital or
shortages that could result in lost sales.
Regular inventory counts can help ensure that the company has the right level of inventory at all times.

Accurate recording of inventory costs

Inventory costs can include the cost of goods sold, freight, handling, and other expenses.
39
Proper recording of these costs is essential to ensure accurate financial statements.

Communication is key

Effective communication between the accounts payable department and other departments, such as
purchasing and receiving,

can help ensure accurate and timely payment of invoices and proper inventory management.

By keeping these findings in mind, you can develop a solid understanding of accounts payable and
inventory management, which will help you excel in your studies and future career.

A payable is created any time money is owed by a firm for services rendered or products provided that
has not yet been paid for by the firm.

This can be from a purchase from a vendor on credit, or a subscription or installment payment that is due
after goods or services have been received.

No. Some people mistakenly believe that accounts payable refer to the routine expenses of a company’s
core operations, however, that is an incorrect interpretation of the term.

Expenses are found on the firm's income statement, while payables are booked as a liability on the
balance sheet.

Receivables represent funds owed to the firm for services rendered and are booked as an asset. Accounts
payable, on the other hand, represent funds that the firm owes to others. For example, payments due to
suppliers or creditors. Payables are booked as liabilities.

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 Chapter-7
Recommendations

Establish a process for receiving and reviewing invoices: Create a formal system for receiving and
processing invoices, and ensure that all invoices are reviewed and approved before they are entered into
the accounts payable inventory.

Maintain accurate records: Keep detailed records of all invoices, including the vendor name, invoice
number, date, amount, and payment terms. This will make it easier to track and reconcile accounts
payable balances.

Monitor payment terms: Keep track of the payment terms for each invoice, and make sure that payments
are made on time to avoid late fees or other penalties.

Review vendor relationships: Regularly review vendor relationships to ensure that you are getting the best
possible terms and pricing.

Analyze inventory turnover: Monitor your accounts payable inventory turnover to ensure that it is aligned
with your business needs and goals.

Use automation: Consider using automation tools to streamline the accounts payable process and reduce
errors.

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Regularly reconcile accounts: Reconcile accounts payable balances regularly to ensure that they are
accurate and up-to-date.

This will help you identify any discrepancies or issues before they become bigger problems.

Chapter-8
Conclusion

manage inventory covers purchasing, producing, and selling inventory items in Manager. It also covers
backorders and content of inventory reports when only basic functions are enabled.

Part 2 covers more advanced features, including credit and debit notes, inventory kits, delivery notes, and
goods receipts. It describes how the program’s behavior changes when these additional functions are
used.

This Part 3 describes additional capabilities: inventory locations, transfers, and write-offs. You will need
to understand information in Parts 1 and 2 before you can use the capabilities discussed here. To begin,
here is the complete status of inventory after all transactions.

A cash sale or purchase is presumed to involve immediate delivery or receipt of goods from or to a
location that can be specified at the time of the transaction.

The same field will appear on sales and purchase invoices unless the Delivery Notes and Goods
Receipts tabs are enabled.
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Then, location must be selected on the corresponding delivery note or goods receipt. This is because a
credit sale or purchase may involve delivering or receiving goods from or to different locations at
different times.

Reference

www.wikipedia.com

www.medius.com

www.netsuite.com

www.smallbusiness.chron.com

www.planergy.com

Company's books of purchase

Company's accounts receipts

Company site book (record books)

Payment receipts.

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 Questionnaire

Dear respondents,

I am AJINKYA KISHOR BHOSALE a student o f MBA, I am under lying a project named Accounts payable
(inventory)
So by filling this questionnaire please help me in completing my research project.

Name :……………………………….

Age :……………………………….

Address :……………………………….

Gender: ……………………………….

Contac tNo. :……………………………….

Occupation :………………………………

Q1.NameoftheRespondent:

1.1 Age:

 20-30
 31-40
 41–50
 51 AndAbove

1.2 Gender:

a) Male
b) Female

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Q2.Do you think that Accounts payable deep impact on the Business?

a) Yes
b) no

45
 Q3.Do you agree that Accounts payable helps in developing business?

a) Highly agree
b) Agree
c) Neutral
d) Highly disagree
e) Disagree

Q4.Accounts payable does not impact much on small scale business and trade .“Do agree this
statement”?

a) Highly agree
b) Agree
c) Neutral
d) Highly disagree
e) Disagree

Q5.As accounts receivable is important as accounts payable .

a) Highly agree
b) Agree
c) Neutral
d) Highly disagree
e) Disagree

Q6.Do you aware of Accounting Policy?

a) Yes
b) No

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Q8. Do you agree Accounting Methods helps in businesses?
a) Yes
b) No

Q9. In company/business all the department are interconnected with each other?
a) Yes
b) No

Q11.Do you think that Accounting entry are help full for reconciliation?
a) Yes
b) No

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