Know / Details About Accounts Payable Process Flow

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1. The AP process starts once the need for any material or service is identified at the production department or any other department.

2. The production department will raise the purchase requisition (PR) through procurement, commercial team.

3. The commercial / production department will then get bids or quotes from different vendors and finalize the vendor.

4. Once the vendor is finalized, they will issue a Purchase Order to vendor.

5. Thereafter, the vendor will deliver the goods / services to warehouse / factory.

6. The warehouse person will enter the receipt of goods in Goods Receipt Note (GRN). In case of services, it is Service Receipt Note (SRN).

7. Simultaneously, vendor will send the invoice copy to Accounts Payable (AP) team.

8. The AP team will do a 3 way match between invoice, PO and GRN/SRN and process the invoice.

9. Payment will be made to the vendor based on the payment terms.

NOTE: Once in a while, the vendor reconciliation will be carried out. This activity will ensure that no invoice in missed or any incorrect accounting is rectified.

JOURNAL ENTRIES:

Entry 1: Receipt of Goods / Services: Expense Account Dr.

                                             To SRN / GRN Control Account

(This SRN / GRN account is a control account which will be knocked off once the invoice is processed by the AP team. This is a liability account. )

Entry 2: Invoice Processing (3 way match) SRN / GRN Control Account Dr.

                                              To AP control Account AP Control Account Dr. To Vendor Account

(AP Control account will be knocked off once the vendor is due for payment. This AP control account is a liability account)

Entry 3: Payment Entry: Vendor Account Dr.

                                                 To Bank Account

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