User manual ACCPAC SIMPLY ACCOUNTING ACCOUNTING MANUAL

[. . . ] Simply Accounting Accounting Manual Canadian Version © Copyright 1998 ACCPAC INTERNATIONAL, INC. ACCPAC INTERNATIONAL, INC. , Publisher No part of this documentation may be copied, photocopied, reproduced, translated, microfilmed, or otherwise duplicated on any medium without written consent of ACCPAC INTERNATIONAL. Use of the software programs described herein and this documentation is subject to the ACCPAC INTERNATIONAL License Agreement enclosed in the software package. This software and its documentation are intended to provide guidance in regard to the subject matter covered. [. . . ] The purpose of subsidiary ledgers is to keep the main ledger uncluttered of details and provide management with useful and necessary information. A company should start to use subsidiary ledgers when it finds its general ledger is getting too cluttered, or that its financial records don't contain enough information for the management to make decisions. When an entry is made in the subsidiary ledger to record, say, one particular customer paying a bill, the main ledger only has a debit to Cash and a credit to Accounts Receivable, while the subsidiary ledger contains all the details (when the customer paid, how he or she paid, how much is still outstanding, etc. ). Depending on the type of subsidiary ledger, the summary of the transactions in the subsidiary ledger need only be transferred to the main ledger periodically. This is always done before income for a period is determined and may be done more often if desired. Accounting Manual 16­1 Accounts Receivable Accounts Receivable This subsidiary ledger keeps track of who your customers are, what their addresses are, and how much money they owe you. It also breaks down the money they owe you by current receivables, overdue 30 - 60 days and any other period that you might decide to follow. It keeps track of the date you invoiced a particular customer, when the customer paid, and how much was paid. If all the data is entered into the ledger, it is an easyto-use and accurate system for determining whom you might extend more credit to and whom you need to concentrate your collection efforts on. Following is an example of how particular customer records might be kept in an Accounts Receivable subsidiary ledger: Customer Western Wholesaling Corp. Current $500 31-60 $50 61-90 -- 91+ -- Total $550 -- -- $700 -- $700 The company's management can now very clearly see that they should not extend more credit to Johnson Enterprises Ltd. until they improve their payment record. Accounts Payable This subsidiary ledger accomplishes many of the same things as the Accounts Receivable subsidiary ledger and provides a record of who is owed money and for how long. This allows a company to maintain a good credit rating by not overlooking bills that must be paid. 16­2 Simply Accounting Payroll Payroll This subsidiary ledger allows management to keep track of employee wages and all the deductions that must be collected and paid out, such as Unemployment Insurance, Canada Pension Plan, Workers' Compensation, and union dues. In addition, it keeps track of names, addresses, social insurance numbers, rates of pay, and normal hours per pay period. It also summarizes the deductions for each employee, the employer's associated expenses, and to whom the amounts are owed. Inventory This subsidiary ledger allows management to keep track of what is in stock and how much it costs. The ledger must be updated frequently in order to keep accurate information as to how much inventory has been sold or is in stock. It keeps track of supplier names, their addresses, stock numbers, quantities normally ordered, price discounts available and of course the amount and value of stock in inventory right now. Accounting Manual 16­3 Chapter 17 Open Invoice Accounting for Payables and Receivables This chapter describes a method of accounting known as the open invoice method. Instead of merely keeping track of the outstanding balance of each vendor and customer, open invoice accounting keeps track of each individual invoice, together with each partial payment made against it. When fully paid, it becomes optional whether the invoice and its payments are retained or purged. Late Payment Charges The open invoice method provides sufficient detail to allow calculations of interest charges on overdue receivables. Similarly you may have to pay interest charges on your overdue payables. Consider the interest charge as an invoice which should subsequently be paid along with other invoices. When you enter these late payment invoices the matching entry would either be to Interest Expense (in the case of accounts payable) or to Interest Revenue (in the case of accounts receivable). Discounts The open invoice method provides sufficient detail to allow you to take advantage of discounts offered by suppliers for early payment of their invoices. These discounts can be considered as negative invoices from your suppliers to reduce the amount of prior invoices. [. . . ] He can be sued personally for the debts of his company. Realization -- The recording of revenues or expenses. Revenue is realized when the title to goods or services passes to the customer. Expenses are realized when they are incurred, or, if they can be matched to a certain good or service provided, they are recorded at the time the revenue for that particular good or service is recorded. [. . . ]