Quick Tour for Account Payable

Posted on August 27th, 2007 by Sanjit Anand | Print This Post | Email This Post

AP takes care of all payments in Oracle Applications. This module has active interaction with Purchasing and General Ledger modules.

The different functionality of the Payables module are:

• Set up Supplier.
• Enter, review and Approve invoices.
• Pay invoices and reconcile payments to bank a/c.
• Enter and apply pre-payments.
• Create journal entries for posting to GL.

An top level overview of the module can be given as :

1.Enter Suppliers

This step consist of set up as well as maintenance of existing one.During the setup, we need to do setup for

• Supplier Accounts
• Taxes
• Payments
• Term Date Basis
• Due Date Basis
• Invoice Currency
• Holds

Importantly the other features in this area consist is :

• Enter employees as Suppliers : this is for managing and controlling Expense report
• Merge duplicate Suppliers

2.Invoices

This consist Setup for;

• Distribution Set
• Tax
• Setup tolerance, matching options

3. Approve invoice

This required set up for rule, so that approval and validation process can validate based on some parameter.

4.Payments

This requires set up for payment related dependency which include ;

• Format
• Bank
• Bank account
• Build program
• Payment Methods
  • Manual
  • Quick Check
  • Automatic Check

Take a note in manual and Quick check, you have to simply enter payment details and correlate to invoices. Automatic check is applicable for batch payments.

5. Create Journal entries

Typical flow for creating Journal entries is summarized as:

And here is final note of accounting Entries of AP :

• During Invoicing
  • Expenses A/C Dr to vendor liability
• During Payment
  • Vendor liability A/C Dr to Cash/Bank A/C

…And, This is Four Rule of Payables

• You must have a vendor to do anything
• Every Invoice must be fully Charged out before paid or posting to GL.
• All Payments must have an invoice
• Every Invoice must run through approval process.

Hope this is a brief overview of the Payable business flow, will discuss & share some more in next couple of post.Till then keep watching this space.