Accounts Payable (AP) Out of Balance

Have issues with your Accounts Receivable being out of balance? Click here for help.

Background
Common Causes of A/P Being Out of Balance
A/P Account Used as the Allocation Account of a Transaction
Customer Pre-Payment Exists
Recently Started a New Fiscal Year
Incorrect Linked Accounts
Helpful Reports
Final Note

Background

The balance of the Accounts Payable account (A/P) on your Balance Sheet should be exactly the same as the amount in the Total Due field on your Payables Reconciliation Report for the same date. Please note that you should always use the Payables Reconciliation to compare against (not the Aged Payables Report).

AccountEdge is a double-entry accounting system which means that each transaction effects two separate accounts. This is important to remember, as when recording many transaction the Accounts Payable account will automatically be effected and you will only be choosing the other account you want to effect.

Common Causes of A/P Being Out of Balance

  • The Accounts Payable account was used as the allocation account in any transaction other than a purchase transaction (e.g., check (CD), deposit (CR) or general journal (GJ) entry)
  • The Accounts Payable account was used as the allocation account on a purchase transaction
  • A Vendor pre-payment exists, so AP will be Out of Balance until a bill is created
  • Recently Started a New Fiscal Year
  • Incorrect Linked Accounts
  • Incorrect accounts for items

A/P Account Used as the Allocation Account of a Transaction

In standard circumstances, the Accounts Payable account should not be the allocation account on a transaction. Since the Accounts Payable account is a linked account in AccountEdge it's often the other half of a transaction that you record.

Example
If you record a Service Purchase transaction you choose an expense account as your allocation account. That way, when the transaction is recorded, it increases your expense and automatically increases your accounts payable.

Finding Whether A Transaction Was Applied To Accounts Payable

  1. Open your AccountEdge company file
  2. Click Find in the bottom left corner
  3. Click on the Account tab
  4. Select the Accounts Payable account number
  5. Use the date range 1/1/1990 to 12/31/9999 (this will include ALL transactions)

This will show you any transaction that hit the Accounts Payable account. If you look in the SRC column it will tell you the source journal of the transaction.

Many of the transactions will be sales (PJ) (which should be there) and payments for purchases (CD) (which should also be there). At the same time - spend money transactions and purchases that have used the Accounts Payable account as the allocation account can also show up here and shouldn't. In most cases General Journal entries (GJ)* and Cash Receipts (CR) should NOT appear.

You can click on the arrow (or double arrow) next to any transaction to look at the full transaction and see whether it is a transaction that should exist.

Once you are looking at the transaction you can select Edit > Delete or Edit > Reverse from the menu bar at the top of the screen to remove/reverse any transactions that shouldn't have been recorded against the Accounts Payable account. You can also change the account from the Accounts Payable account to a more appropriate account if desired.

*NOTE: Sometimes accountants will create General Journal entries to balance the Accounts Payable account. You should speak with your accountant before modifying/deleting any entries they may have made.

Vendor Prepayment Exists

If you have a bill that is dated AFTER the payment the payment that has been applied to it this will cause an out of balance issue.

Example
I have a bill I've created for John Smith on 7/20/2016 for $5,000. I also have a payment for this bill but it's dated 7/15/2016. If I run my Payables Reconciliation report for 7/15/2016 I will show that $5,000 as an Out of Balance amount because the payment was made before the date of the bill.

Incorrect Linked Accounts

This one can be tricky. If you've changed the linked Accounts Payable account it can cause discrepancy. Finding out whether it's been changed is easy enough - the tricky part comes in during the resolution.

To check the linked Accounts Receivable account:

  1. Go to Setup > Linked Accounts > Purchases Accounts from the menu bar at the top of the screen
  2. The first account listed is your linked account for Accounts Payable. This should be your A/P account (there can only be one)

If the linked Accounts Payable account was changed to an incorrect account and any transactions were recorded using this improper account ALL purchase transactions against the improper account need to be re-recorded. You can do this by opening each bill individually and putting an asterisk (*) in the notes field and then by hitting ok. This will re-record the transaction with the proper linked account.

NOTE:Users who have the multicurrency preference turned on will also need to check their linked Payable account for any currencies used. You can do this by:

  1. Go to Lists > Currencies from the menu bar at the top of the screen
  2. Click on the arrow (double-arrow) next to any currency that you use
  3. Click on the Payables Accounts tab
  4. The first account listed is your linked account for Accounts Payable for this currency. This should be an A/P account for this currency. You can follow the above process to re-record any improper transactions.

Incorrect Accounts for Items

Check the Profile of Items, verifying correct Expense or Cost of Sales account, Income account, and Inventory account. None of these should have your linked A/P account listed. A fast way to do this would be to select File > Export Data > Items. Select to export the Item Number. Then select the Buy, Sell, Inventory fields, as well as the account fields for these fields. Open the resultant file in Excel or Numbers. Verify accounts.

If anything is incorrect you would need to adjust the item and then re-record the sales/purchases assocatiated with these incorrect items as per the instructions in the Incorrect Linked Accounts section.

Helpful Reports

Exceptions Reports
You can run the Payables Reconciliation Exception report (this is different then the standard Payables Reconciliation report). You can find this by:

  1. Go to Reports > Index to Reports from the menu bar at the top of the screen
  2. Click on the Accounts tab
  3. Scroll down until you see the bold heading "Exceptions"
  4. Run the Payables Reconciliation, Future Dated Transactions and Prepaid Transactions - all can be helpful in finding transactions that may be problematic

Aging Report
Don't run the Payables Aging report if you are looking to only include transactions until a particular date. Run instead the Reconciliation Summary or Reconciliation Detail report under Payables.

Account Transactions or Trial Balance Detail Reports
These reports can be run specifically for your A/P account and may be helpful in sorting through the transactions. To run these reports:

  1. Go to Reports > Index to Reports from the menu bar at the top of the screen
  2. Click on the Accounts tab
  3. Account Transactions is under the bold heading Accounts and Trial Balance Detail is under the bold heading General Ledger Trial Balance
  4. Select whichever report you want to run and click customize
  5. Select ONLY the A/P account you want to run this for as well as a large date range (1/1/1990-12/31/9999)

Final Note

Historical Purchases and Debit Memos will debit and credit your Accounts Payables account; however, these transactions are correct. Do not remove them.