Processing of Account payables and account receivables

Accounts Payable (AP): Accounts payable refers to the money a company owes to its suppliers for goods and services purchased on credit. The processing of accounts payable typically involves the following steps:

1. Invoice Receipt: Upon receiving goods or services, the invoice from the supplier is collected.
2. Invoice Verification: The invoice is checked against purchase orders and receipt confirmations to ensure accuracy.
3. Approval Process: The verified invoice is forwarded for approval, often requiring managerial consent before payment processing.
4. Payment Processing: Once approved, payment is scheduled according to terms (e.g., net 30 days), and payment methods (e.g., checks, electronic transfers) are chosen.
5. Record Keeping: Transactions are recorded in the accounting system to maintain updated financial records.
6. Reconciliation: Regular reconciliation of accounts payable with supplier statements ensures that all transactions are accounted for.

Accounts Receivable (AR): Accounts receivable represents the money owed to a company by its customers for goods and services provided on credit. The processing of accounts receivable generally includes:

1. Invoice Generation: Invoices are created and sent to customers after goods or services are delivered.
2. Payment Tracking: Payments received from customers are tracked, including due dates and payment terms.
3. Collections: Follow-ups on overdue accounts may be conducted through reminders or collection efforts.
4. Payment Application: Received payments are accurately applied to customer accounts to update outstanding balances.
5. Compliance and Reporting: AR balances are monitored for compliance with company policies and regulatory requirements, with regular reporting for management.
6. Reconciliation: Regular reconciliation with customer accounts helps to ensure accuracy and resolve discrepancies.

Category:Processing of Account payables & account receivables