AP – Creating Vendor Accounts (Part 2)

Now let me go through the partial payment. Same process. You need not test it. If you are comfortable with the partial payment in case of customer, the same process here. Take here. You can take partial clearing. Out of 1 lakh 35,000, say first we have paid 35,000. 20405 is my bank account.

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This is also partial clearing, Partial payment to vendor. account 400501. Process open items.

Here since I cannot save the document, go to partial payment tab. Keep the cursor in the payment amount column. Double click.

So 35, 35. I can save the entry.

Similarly second entry. Next payment 200405. Suppose we have received 1 lakh. Balance 1 lakh we have received it.

Process open items.

So what should I do? I need not go to partial payment now because 1 lakh 35 is the outstanding amount. 1 lakh and 35,000, both are there. That’s why now I need not do anything. Simply save it. System will allow you to save.

Go to FBL1N and look at the open items.

You don’t find any open items. Cleared items and all items. So 122, 35, 1 lakh, 1 lakh 35 thousand. So like this, we can use the same thing. The clearing process we have used for the purpose of customers, I can use the same method for even vendors. But the thing is only the accounting entry is exactly the ones. Now here we have same advanced payment to vendor. So here, when I’m going to make the advance payment to vendor, how it works. So from accounting perspectives, almost same. The difference is only, exactly reverse entry is going to be posted here.

 

Treatment of advanced to vendors. Here, we are making payment to vendor. See, in case of normal purchase, raw material account return to vendor account. That is raw material account, we are debiting it. Vendor account is going to be credited because he’s the supplier. Credit the giver, debit the receiver. That is the concept. So when payment is made to vendor, vendor account is debited with sundry creditors account. Anyhow, bank account is credit. This is normal process. When coming to the advanced vendors here, without receiving any material, we are paying the advance to the vendor. So when advance is paid to the vendor, vendor account debited, vendor account return to bank. But here when you post the vendor account, I don’t want Sundry creditors account,I want advance to vendor account. Advance to vendor account is is an asset. Because we are making payment to the vendor as an advance, up to receipt of material, then it will be nullified. In case of the first entry, when advance is paid to vendor, we’ll debit vendor account. But my accounting requirements requires advance to vendor account should be debited to bank. How we have to do it? Same way. We are going to use special GL indicator A. In case of customers, the same process is going to be again followed here. When raw material is received against advance, raw material account return to vendor account. But when you are posting to vendor account, it will be posted to sundry creditors raw material. Because I want this, here, I’m going to use special GL indicator A. See advanced vendor account is a recon account, special GL account. And I’m going to use A as special GL indicator. Same process again. Third one, transfer the balance from special GL to normal GL because vendor account here, advanced account, amount is lying in the advanced account. And as soon as I paid advance, it is posted in the advance account. When the supplier has supplied material to us, raw material return to vendor account. Now transactions with the vendor is over already because we have paid advance that will have supplied goods to us. Now what I need to do is transfer the balance from advance account to sundry creditors account. Otherwise, it will show outstanding amount as if we are yet to make the payment to the vendor. So that’s why what I need to do is cancel the balance from special GL to normal GL. Vendor account data to vendor account. Here, the vendor account is the same in vendor but accounts are different. Same way. See how we have vendor account here FK10N.

See this is going to be normal GL. So this is going to balance normal GL. This is special GL. If you post any entry with special GL indicator, that will be posted here. Now what all you are seeing is only the total account balance. Now let us, so what is the process for this? Here, first of all, advance to Vendors. I need to create a advance to Vendors account, and the Sunday creditors anyhow we have. Here, only one configuration step. In case of Sunday debtors also, we have done only one configuration step. Before that, let us create a GL account for advance to vendors account.

 

Go to T-code FS00.

So advance to vendor is a current asset because we are paying advanced to vendor. So that’s an asset for us. We can use loans and advances. I can create 200501. Loans and advances, balance sheet account, Advance to Vendors or down payment to Vendors, whatever it may be. Down payment or advance are one and the same. And even this is a recon account.

Recon account Vendors. Because I may be receiving advanced from several vendors. Then in such case, I’m going to link up my advance account to the vendor. Recon account type, Vendors account and line item display. Sort key, I can take 012. What is 012? Vendor number wise. So in advance account vendor number wise it will be sorted out.

As usual since there is a recon account, the G067 is the field status group. Save it. So 200501. So I don’t know how many of you have worked on advance from customer type, the same process I’m going to use now. Account receivable and accounts payable. Business transactions,down payment made. Now we are making down payment.

Define alternative reconciliation account for down payment. Because why I need alternative reconciliation account, Vendor account return to bank. Whenever I post to any vendor account, it will go to sundry creditors, but now I want this to be posted to advance to vendor account.

So that’s why here, say down payment. Double click on this, our chart of accounts, 1001201.

This is sundry creditors. So what does it mean? In case of chart of account, DRCA, account type K that is for vendor. And if the payment is used with reference to the A that is special year indicator, then system will route any amount from this account to this account. So that’s why we are telling to the system don’t post to this account. Post to this special GL account. That is normal GL account. Normal GL that is of course a recon account.

Then coming to Business process. So what is our business process? First of all let us make payment to the vendor. See the same process when advance is paid to vendor. So let’s make payment to vendor. Down payment. F-48 down payment. We are making down payment to our vendor.

So document date 25.09.2013. Then vendor account. I’ll take second party, PQR. We have posted already in ABC. I’m taking PQR. Bank account 200405. Say for example amount we have received. Down payment, advance amount, say 1 lakh 15 thousand. Text advance paid to vendor. But here, whenever you are posting to vendor, don’t forget to give special GL indicator. Because otherwise, how system is going to know whether it is advanced or normal payment. See, if I press enter, system will ask fill in all the required fields.

So here I have to give A. Click new item 115,000 advance paid to vendor.

Axis bank account is going to be credited and advanced account, that is PQR suppliers account is going to be debited. And here system is using A, means there is a special GL indicator. Save and display.

So when advance is paid, bank account is credited. PQR raw material suppliers account is going to be debited. And general ledger view, Axis bank to advance to vendor account. What is the next step? We have first paid advance, then the fellow has to supply material to us. So when you receive material, we post the invoice. That’s why take your F-43 invoice general. Account 400502.

See, 115 down payment exists on current assets. Material received against advance. So here system is posting to when you receive the material, the system is posting to the sundry creditors, normal entry. First line item is going to be credit. Then second line item is going to be debit. 40.

And, inventor of raw material. That is 200201.

So first we have paid advance then material is received. Now third entry is transfer the balance from special GL to normal GL. Why? Because the advance is lying in advance account. Let us go to party account and see. FK10N, 400502. Execute it.

See, party account is showing still credit balance. That means we are yet to make the payment. But whereas we have already made the payment of advance that is there in debit. Now what I need to do is simply transfer the balance from here to here. Party account is same. That is the accounting entry. Same entry is being shown here. Transfer the balance from special GL to normal GL. Same vendor account. Don’t get any confusion for this entry. You need to understand. Vendor account is debit, Vendor account is credit. But the associated recon accounts will change here. Because the amount is lying in advance account, I’m transferring from this account to sundry creditors account. So that’s why what I need to do is now transfer the balance from special GL to normal GL. That is here F-54, Clearing. Use this. Date 25.09.2013. Vendor account 400502.

Invoice, the latest invoice will be picked up by the system and transfer the balance from special GL to normal GL. Process down payments. The same way exactly even in case of account receivable. Same process we have used. Keep the cursor in the transfer posting column, double click.

So amount will come. Save it. What is the accounting entry? Go to display.

So same, see here. Vendor account, vendor account. But you see the general ledger account. That will change.

Advance to vendors account is credited and sundry creditors account is debited because payment is just transferred from special GL to normal GL. You can see here FK10N.

Amount debit and credit nullified. See the balance but the thing is both the entries will be shown as open items. For this, I need to manually clear the open items. F-44, 400502. Process open items.

Here you need not do anything. Simply this is clearing the open items. Save it. Now see the party account FK10N

It has converted into green. So manual clearing. If you follow accounts receivable, the advance in accounts receivable, same concept. Just once again I’m repeating that’s all. So we have posted, the open items are cleared and invoices are raised and advances also completed. So next, we are going to take up one, very important topic that is automatic payment program.