3 REPORTS PRODUCED BY THE ACCOUNTING SYSTEM

3.1 INTRODUCTION

In addition to recording purchase invoices, input sales tax, discount received and returns outwards, computerised accounting systems will produce a range of documents and reports to assist managers and employees within a business, such as transactions listings, or individual payables' ledger accounts for specific suppliers if there is a query to be resolved.

Depending upon how large or complex an organisation is, the purchase of goods or services is normally initiated by a purchase requisition. This is a request for goods or services to be ordered when a business need has been identified. Upon approval of the requisition, a supplier can be selected based upon appropriate criteria (cost, delivery date etc.) and a purchase order raised and issued to that supplier.

Upon receipt of the goods or services, they will be checked to confirm they are complete and in good condition and the progress of the purchase order can be updated. Receipt of the invoice from the supplier will enable the general ledger purchases and trade payables' accounts to be updated. Simultaneously, the memorandum information of the individual credit supplier account will be updated, along with the aged payables' analysis (see 3.2 below) and other management reports (see 3.3 below).

The cycle will be completed in due course when payment is made for the goods and services received. This will be evidenced by a detailed listing of bank payments which is used to update the general ledger accounts and the memorandum management information.

3.2 AGED PAYABLES' ANALYSIS

In exactly the same way as customer balances can be analysed in terms of their age, so too can suppliers' balances. We refer in this case to an aged payables analysis.

An aged debt analysis relating to credit customers is an important tool of management control. By referring to amounts overdue, managers can initiate appropriate action to chase slow payers. This is obviously not an important consideration in the reverse situation (money owed to credit suppliers) and as a result, most businesses make less use of their payables analysis than of their receivables analysis.

Despite this, there are good reasons why managers should pay attention to the aged payables analysis. One reason is the need to maintain good relationships with trusted suppliers. If an organisation is consistently late in paying its debts, suppliers may retaliate by reducing the level of customer service, withdrawing favourable trading terms, or, in the last resort, refusing to make further supplies. To avoid this issue, it makes sense to monitor suppliers' balances to ensure that debts due are paid in good time.

It is also a good idea for a business to monitor amounts owed to ensure that settlement discounts are claimed and not missed.

An aged payables' analysis is prepared exactly the same way as the aged receivables' analysis. The layout of the report, also, is the same as we have already seen in the aged receivables' analysis. The only difference, obviously, is that the starting point is the ledger accounts for credit suppliers rather than credit customers. In addition the time periods used may be shorter, to indicate time periods within which payments must be made if discount received on early settlement of amounts due is to be earned.

An analysis is typically presented as follows. In this example, there are just three credit suppliers, but in reality there could be any number of them.

3.3 OTHER REPORTS

Other reports produced by a computerised accounting system relating to payables include:

• purchase requisitions record, including progress towards order placement
• purchase orders record, including progress towards completion, which may be in several stages if there are multiple deliveries of goods, or if damaged goods are returned
• a transaction listing e.g. purchase invoices processed in a particular week or on a specific date or a list of bank payments made to individual credit suppliers
• a payable ledger account extract or summary for an individual credit supplier which may be used to reconciled with statements issued by the supplier to confirm that the payable ledger account balance is fairly stated
• a summary of the results of a 'search enquiry' eg a list of all invoices processed with a net cost of $2,500 or a list of all payable ledger account balances in excess of $7.500 as at a specific date.