Undelivered Invoices of Creditors
How to treat undelivered invoices of suppliers in the accounts payable?
Assume that we close the accounts at 31/12/2010 for the year. Supplier "A" balance as per my AP is 10,000, but as per SOA of supplier, it is 15,000 as at 31/12/10.
The reason for the 5,000 difference is undelivered invoices totalling 5,000. Do I need to collect undelivered invoices & account for them as at 31/12/10 even though I will receive invoices in January 2011 OR can I just make a provision for it ?
At the same time what is the amount we confirm in debtors statement of suppliers to their auditors as at 31/12/2010 (is it 10000 or 15000)?
Please answer as it is a practical problem to me.
As a general rule, you never pay a vendor from a Statement of Account.
As it is year-end, I would ask the vendor(s) if they could fax and/or email you a pdf copy of the missing invoices for your year-end file.
If that is not possible, and you know the invoices are valid, you could just do an accrual to Accrued Liabilities at December 31, 2010 and reverse the entry on January 1, 2011.
Again, if you know the $5,000 worth of invoices are indeed valid and the amounts were outstanding at December 31, 2010, then $15,000 is the amount you confirm with their auditors.
One of the reasons you receive a Statement of Account is to perform a vendor reconciliation
like you are doing. When doing your vendor reconciliation, check for outstanding credits.
Make sure to apply all outstanding credits to the next invoice if the vendor does not/has not issued a cheque.
Receiving a cheque payment is less confusing. If you do apply credits, make sure you clearly indicate on the invoice how the invoice was paid. Clear documentation is essential.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.