Reconciling A/P Accrual Accounts Balance

At any given time, the balance of the A/P accrual accounts can account for the following transactions:

• Uninvoiced Receipts

• Over-invoiced Receipts

• Invoice Price Variance (for transactions created using Release 9)

• Errors (Invoices or inventory transactions charged to this Account by mistake)

You need to analyze the balance of the A/P accrual accounts, distinguish accrued receipts from invoice price variances, and identify errors.

Analyzing the A/P Accrual Account Balance

You need to monitor potential problems with purchasing and receiving activities that can affect the accuracy of your A/P accrual accounts. You can use the Accrual Reconciliation Report to identify the following problems in receiving, purchasing, inventory, work in process, or accounts payable transactions:

• Quantities differ between receipts and invoices

• Incorrect purchase order or invoice unit prices (previous releases only)

• Discrepancies in supplier billing

• Invoice matched to wrong purchase order or wrong purchase order line

• Received against the wrong purchase order or order line

• Miscellaneous inventory or work in process transactions that do not belong to the accrual accounts

• Payables entries for sales tax and freight that do not belong to the accrual accounts

Using the Accrual Reconciliation Report

Use the Accrual Reconciliation Report to analyze the balance of the Accounts Payable (A/P) accrual accounts. To submit this report, you must have Purchasing and Payables installed. You can accrue both expense and inventory purchases as you receive them. When this happens, you temporarily record an accounts payable liability to your Expense or Inventory A/P accrual accounts. When Payables matches and approves the invoice, Payables clears the A/P accrual accounts and records the liability from the supplier site. See: Accrual Reconciliation Report. Typically, you run this report at month end. After you have entered your receipt transactions and matched your invoices, you can run the Accrual Reconciliation Report for any transaction date range and identify any differences between your PO Receipts and A/P Invoices. This report also displays any miscellaneous transactions recorded in error to your accrual accounts. These miscellaneous transactions or transactions unrelated to purchase order receipts may be from Payables, Inventory, or Work in Process (depending on your installation). After you have researched the reported accrual balances, you can use the Accrual Write-Off form to indicate which entries you wish to remove and write off from this report. And, after you have written off these entries, you can use the Accrual Write-Off Report as supporting detail for your manual journal entry.

Resolving Quantity Differences

The Accrual Reconciliation Report lets you easily identify quantity differences (i.e., when the quantity received for a purchase order shipment is smaller than the quantity invoiced). Such differences leave residual balances that never clear from the A/P accrual accounts. You should investigate the cause of these differences and take corrective actions before closing your period. Common causes of quantity differences include late inventory receipts, incorrect receipt quantities, and supplier overbilling. To correct late receipts, ensure that receivers enter all receipts into inventory. To correct receipt quantities, enter receipt corrections. To correct overbilling errors, follow your standard procedure for supplier debit memos to clear the difference.

Resolving Price Differences

The Accrual Reconciliation Report lets you determine how much you should have paid and whether the PO or invoice is correct. Such differences leave residual balances that never clear from the A/P accrual accounts. You should investigate the cause of these differences and take corrective actions before closing your period.