Reviewing PeopleSoft Payables Accounting Entries Examples

This chapter lists common elements and discusses:

• PeopleSoft Payables accounting entries.

• Accounting entries for standard vouchers.

• Accounting entries for debit memo adjustment vouchers.

• Accounting entries for prepayments.

• Accounting entries for draft payments.

• Accounting entries for letter of credit payments.

• Accounting entries for withholding payments.

• Accounting entries for vouchers with multiple freight charges.

• Accounting entries for claim vouchers.

• Accounting entries for voucher closure.

• Accounting entries for unposted vouchers.

• Accounting entries for canceled or voided payments.

• Accounting entries for interunit vendors.

• Accounting entries for value-added tax (VAT) transactions.

PeopleSoft Payables Accounting Entries

The following accounting entry examples are based upon certain assumptions:

• Examples are based upon a single line voucher with the following details:

  • The business unit is DEU01.

  • The gross amount is 10,000.

  • The transaction currency and base currency is EUR.

  • Discount is 2 percent.

  • Distribution general ledger DEU01.

• Payments are made in the same currency as the voucher.

• Payments are made from a bank owned by the vouchering business unit.

• Accounting is at gross.

• The Summary Control value is specified as the default posting method.

• Two sets of payment posting results are shown: discount not taken and discount taken.

  In actual posting, only one entry is created.

Common Elements Used in This Chapter

See Also

Selecting General Controls

Accounting Entries for Standard Vouchers

The following examples illustrate accounting entries for regular vouchers.

Action: Voucher Entered and Posted

There are two accounting entries for the voucher transaction: expense distribution and accounts payable. The expense distribution entry tracks who should incur the expense and applies to the distribution general ledger business units that you entered on the voucher. The accounts payable entry accounts for what is owed to the vendor and applies to the vouchering payables business unit. For this voucher transaction, both of these entries are recorded to the general ledger business unit DEU01.

Action: Payment Entered and Posted, Discount Not Taken

There are two accounting entries for the voucher transaction at payment time: accounts payable and cash distribution. The accounts payable entry removes the liability that was created when the voucher was posted. The cash distribution entry represents the actual cash payment and the reduction to the cash account. For this voucher transaction, both of these entries are recorded to general ledger business unit DEU01.

Action: Payment Entered and Posted, Discount Taken

The new entry in this example is for the discount earned account. Because accounting is set at gross and our liability is the gross amount of the voucher, it is necessary to create an entry for the discount earned account to maintain a balanced entry.

Accounting Entries for Debit Memo Adjustment Vouchers

Debit memo adjustment vouchers can automatically be created for discrepancies between the voucher and the purchase orders and receivers.

The following accounting entry examples are based upon these assumptions in addition to the assumptions made in the prior section:

• The purchase order amount is 10,000 EUR.

• The receiver amount is 8000 EUR.

• The Matching Application Engine process (AP_MATCH) is run.

Note. The Matching process creates debit memos for merchandise amounts and tax amounts only. No miscellaneous charges, freight charges, or discounts are applied to the debit memo vouchers. The system calculates sales and use tax amounts and VAT amounts based on the tax codes specified on the voucher line.

Action: Voucher Entered and Matched, Debit Memo Created and Posted

The two accounting entries for the debit memo are accounts payable and expense distribution. The debit memo voucher will inherit the distribution line information.

Accounting Entries for Prepayments

Prepayments are possible through the use of prepaid vouchers. For accounting purposes, the net effect of a prepaid voucher is a merchandise voucher paid or partially paid by a prepaid voucher. Thus, instead of crediting a cash account, use the expense account for the prepaid voucher.

The following accounting entry examples are based upon these assumptions in addition to the assumptions made in the prior section:

• The prepayment voucher is applied to the voucher described above (10,000 EUR).

• The business unit is DEU01.

• The prepayment amount is 1000 EUR.

Action: Prepaid Voucher Entered and Posted

The two accounting entries for the prepayment are prepaid expense and accounts payable. The accounting entry template populates the account for the prepaid expense entry during voucher creation. It is reversed when the prepayment is applied to the merchandise voucher.

Action: Payment Created and Posted for Prepayment

Prepayments are never discounted. Posting the prepayment releases the payables liability and leaves the prepaid expense entry open.

Action: Invoice Received, Voucher Entered, Prepayment Applied to Voucher, and Posted

Posting the invoice and applied prepayment creates the following entries:

• Accounts payable entry and expense entry for the merchandise voucher.

• Accounts payable entry and expense entry to reverse the prepayment.

Payment processing:

Prepayment processing:

Action: Payment Created and Posted for the Invoice Balance, Discount Not Taken

Posting the payment creates the following entries:

• Cash entry for the balance of the merchandise voucher.

• Accounts payable entry to fully reverse the liability balance.

Action: Payment Created and Posted for the Invoice Balance, Discount Taken

Accounting Entries for Draft Payments

When a payment is made with the draft (EFT, customer, or vendor) payment method, it's necessary to post accounting entries to the draft clearing account. This should only be done when the payment has a post status of U (unposted) and has a draft status of C (created) or A (approved).

Action: Voucher Entered and Posted

Action: Payment Entered and Posted, Discount Not Taken

The system credits the draft clearing account instead of the cash account.

Action: Payment Settlement Date Reached, Discount Not Taken

Once the draft reaches the settlement date, the system reverses the draft clearing account and credits the cash account. This is only done when the payment has a posted status of P (posted). a draft status of A (approved); and the settlement date is on or before the posting date.

Action: Payment Entered and Posted, Discount Taken

When a discount is taken, the system subtracts the discount amount from the draft clearing amount and posts the difference to the discount earned account.

Action: Payment Settlement Date Reached, Discount Taken

Once the draft reaches the settlement date, the draft clearing account is reversed, and the cash account is credited. This is only done when the payment has a post status of P (posted), has a draft status of A (approved), and the settlement date is on or before the posting date.

Accounting Entries for Letter of Credit Payments

When a payment is made with the letter of credit payment method, post accounting entries to the line of credit account. This should only be done when the payment has a post status of U (unposted) and a payment method of LC (letter of credit).

Action: Voucher Entered and Posted

Action: Payment Entered and Posted, Discount Not Taken

The system credits the letter of credit account instead of the cash account.

Action: Payment Entered and Posted, Discount Taken.

When a discount is taken, the system subtracts the discount amount from the letter of credit amount and posts the difference to the discount earned account.

Accounting Entries for Withholding Payments

Depending on your withholding setup, PeopleSoft Payables either generates a separate withholding payment when the voucher is paid, or tracks the withholding for reporting purposes. During the Payment Posting or Voucher Posting Application Engine processes (AP_PSTVCHR and AP_PSTPYMNT, respectively), depending on whether you selected to have withholding calculated at voucher posting or at payment time, a liability is created for the withholding portion as the vendor portion is paid. As you pay the withholding portion, the liability reduces based on the setup in PeopleSoft General Ledger.

Our example is for a 1099 vendor with the following additional information and withholding defaults:

• The business unit is US001.

• The transaction currency and the base currency is USD.

• The entity is the IRS.

• Federal withholding is 33 percent.

Action: Voucher Entered and Posted, Withholding Calculated at Voucher Posting

Action: Voucher Entered and Posted, Withholding Calculated at Payment Posting

Action: Regular Payment Entered and Posted for the Nonwithholding Portion, Withholding Calculated at Payment Posting, Discount Not Taken

The payment is made only to the vendor and a withholding liability is created for the withholding portion. The withholding entries are grouped by entity and jurisdiction. When the withholding portion is paid to the taxing entity, the withholding liability is debited and the cash distribution account is credited.

Payment processing:

Withholding processing:

Action: Regular Payment Entered and Posted, Withholding Calculated at Payment Posting, Discount Taken

Payment processing:

Withholding processing:

Accounting Entries for Vouchers with Multiple Freight Charges

This example uses the following additional information:

• The merchandise amount is 9000.

• The air freight amount is 700.

• The land freight amount is 300.

Different accounts are defined for air freight and land freight. The Voucher Posting process creates the following entries:

Action: Voucher Entered and Posted

There are no differences with the payment posting.

Accounting Entries for Claim Vouchers

Processing claims vouchers result in accounting entries between the PeopleSoft Payables and Receivables systems, as shown in this table:

Action: Claim Voucher Generated from the Claims Workbench, but not Posted

Action: Voucher Posted, Claim Voucher Closed

Continuing with the current example, this table shows the resulting accounting entries after voucher closure:

When you process claim settlements from the Claims Workbench that are debit memos, the Voucher Posting process closes the claim voucher, debiting the payables account and crediting the rebate account.

Claim settlements that are a payment type other than debit memos (for example, checks) are handled by the Receivable Update Application Engine process (ARUPDATE). Here, the Receivable Update process closes the voucher by debiting the receivables account and crediting the rebate account.

For both processes, the system derives the rebate account information from the rebate agreement.

Accounting Entries for Voucher Closure

When closing a voucher, the voucher is identified to prevent payments from being made for the voucher. The original voucher must be posted before the reversing entries can be created.

Action: Voucher Entered and Posted, Then Closed, Closed Voucher Posted

If the above voucher closes, the entries are:

However, if the voucher has been partially paid, then only the portion remaining open is closed. Therefore, if the vendor pays 5000 EUR, the remaining 5000 EUR closes.

Action: Voucher Entered and Posted, 50 Percent of the Voucher Closed, Closed Voucher Posted

Accounting Entries for Unposted Vouchers

The system creates reversing entries and archives the original entries. The UNPOST_SEQ for the archived entry is one higher than for the reversal entry. Nothing is deleted.

The reversing accounting entry is as follows:

Action: Post Voucher

Action: Unpost Voucher

Reversing entries only pass to the appropriate ledgers.

Accounting Entries for Canceled or Voided Payments

Payments are canceled or voided with reissue or closed liability. When canceled or voided and then reissued, the voucher becomes available for repayment. When the liability closes, the voucher is identified, and payment can no longer be made for the voucher. Payments can be made up of multiple vouchers; therefore, all the vouchers for the payment are either reopened or closed.

Action: Payment Entered and Posted, Then Canceled and Marked Reissue, and the Canceled Payment Posted

Payment processing:

If the payment has been discounted, the discount is also reversed.

Cancellation processing:

Accounting Entries for Interunit Vendors

Interunit vendors enable you to eliminate transactions between legal entities that belong to the same financial group. The affiliate ChartField is populated on all accounting lines for the vendor master data. This is a standard accounting entry.

Action: PeopleSoft France Buys Licenses from PeopleSoft, Inc.

In the following example, PeopleSoft France buys some licenses from PeopleSoft Inc. Vendor US0000001 is also identified as BU US001 and then as an interunit vendor.

Accounting Entries for VAT Transactions

There are several types of VAT transactions. This section discusses accounting entries for vouchers with:

• Recoverable VAT calculated at gross.

• Recoverable VAT calculated at net.

• Recoverable inclusive VAT.

• Recoverable inclusive VAT calculated at net.

The following examples use this additional information, unless otherwise specified:

• Record Input VAT is selected.

• VAT is calculated at gross.

• The VAT calculation type is Exclusive.

• The VAT declaration point is Invoice Date.

• The VAT tax rate is 10 percent.

• VAT is 100 percent recoverable.

VAT Calculated at Gross or Net

Discounts determine the difference between VAT calculated at gross and VAT calculated at net. Calculating at gross uses the gross amount that you enter on the voucher when determining the VAT basis amount. Calculating at net assumes discounts are always taken. The VAT amount is the gross amount minus the net discounts.

Calculating VAT at gross:

• Gross amount = 10000

• Discount = 2 percent

• Gross = 10000 (VAT basis amount)

Calculating VAT at net:

• Gross amount = 10000

• Discount = 2 percent

• Net = 10000 - (10000 * .02) = 9800 (VAT basis amount)

Note. You cannot select the Recalculate check box on a payment when you are calculating at net.

VAT Calculation Types

There are two types of VAT calculation methods: exclusive and inclusive.

• VAT Exclusive: The VAT amount reported on the vendor's invoice and entered into PeopleSoft Payables from the merchandise amount.

  The system generates a calculated VAT amount that is used to check tolerances. The system calculated amount is gross (merchandise amount) * VAT code %.

• VAT Inclusive: The VAT amount is not reported separately on the vendor's invoice but is included in the merchandise amount.

  Because the VAT amount is included in the gross amount, it is necessary to determine the expense distribution portion using the following equation:

  Gross - (VAT Code % * distribution expense) = distribution expense

  PeopleSoft calculates the distribution expense by substituting in the appropriate values:

  Gross Amount = 10000

  VAT Code = 10%

  Expense Distribution = x

  10000 - .1x = x

  10000 = x + .1x

  10000 = 1.1x

  x = 10000 / 1.1

  x = 9090.91

  The Include Freight and Include Misc Charges (include miscellaneous charges) options are not valid if the VAT calculation type is inclusive.

VAT Declaration Point

The VAT declaration point determines the date on which VAT input is recognized. There are four possible dates:

• Accounting.

• Delivery.

• Invoice.

• Payment.

The Record Input VAT option must be selected. For accounting purposes, accounting, delivery, and invoice declaration points create the same entries; an entry is made to a VAT input account when the voucher posts.

Payment generates an accounting entry to a VAT input intermediate account when the voucher posts. This entry reverses and posts to the VAT input account when the payment posts.

The VAT use type determines the percentage of the VAT input that is recoverable and the percentage that is a nonrecoverable amount.

Accounting Entries for Vouchers with Recoverable VAT Calculated at Gross

The following examples illustrate accounting entries for vouchers with recoverable VAT calculated at gross.

Action: Voucher Entered and Posted

The system calculates the VAT amount using the VAT basis amount (10000), the VAT rate (10 percent), and recoverable percentage (100 percent). The VAT calculation type is Exclusive; therefore you must enter a VAT amount on the Voucher Invoice Information page or on the VAT Header page.

Action: Payment Entered and Posted, Discount Not Taken

The payment accounting entries for this example are no different from those for the standard voucher example, but a balance exists in the VAT Input Recoverable account.

Action: Payment Entered and Posted, Discount Taken

The payment accounting entries for this example are no different than those in the standard voucher example. The differences are the calculation of the discount, based on the total merchandise amount including the VAT, and the balance in the VAT Input Recoverable account.

Action: Payment Entered and Posted, Discount Taken, Recalculate at Payment

When you recalculate at payment, you can create adjusting entries to reduce the amount of recorded VAT based on payment discounts. This is only true when VAT is set to calculate at gross. The system assumes 100 percent recoverability of VAT unless set up differently.

Accounting Entries for Vouchers with Recoverable VAT Calculated at Net

The following examples illustrate accounting entries for vouchers with recoverable VAT calculated at net.

Action: Voucher Entered and Posted, VAT Calculated at Net

Calculating at net assumes discounts are always taken. In this example, the entry to the VAT Input Recoverable account is net of the discount. Based on the amount and tax code specified on the voucher line, less the discount, the system calculates a VAT amount; as the VAT calculation type is Exclusive, the user must enter a VAT amount.

Action: Payment Entered and Posted, Discount Not Taken, VAT Calculated at Net

Because the discount is not taken, and the VAT input is calculated net of the discount, it appears necessary to account for the difference at payment time. However, because you enter the VAT amount on the header, the system has no way of knowing whether a discount should be added. The system proceeds as if you entered the full VAT amount.

Action: Payment Entered and Posted, Discount Taken, VAT Calculated at Net

Because the VAT amount is user-entered, the system has no way of knowing whether a portion of the discount should be subtracted. Therefore, the entire discount amount is deducted.

Accounting Entries for Vouchers with Recoverable Inclusive VAT

The following examples illustrate accounting entries for vouchers with recoverable inclusive VAT.

Action: Voucher Entered and Posted

The calculation assumes the VAT amount is included in the gross amount that you entered on the voucher header. The system automatically makes the calculations.

Action: Payment Entered and Posted, Discount Not Taken

Action: Payment Entered and Posted, Discount Taken

Because the discount is taken and the system is set to account at gross, it is necessary to account for the discount at time of payment. The VAT amount is not adjusted by the discount.

Action: Payment Entered and Posted, Discount Taken, Recalculated at Payment

Accounting Entries for Vouchers with Recoverable Inclusive VAT Calculated at Net

The following examples illustrate accounting entries for vouchers with recoverable inclusive VAT calculated at net.

Action: Voucher Entered and Posted

In performing the calculation, the system assumes that the discount is taken and the VAT amount is included in the header gross amount.

Action: Payment Entered and Posted, Discount Not Taken

The VAT is not adjusted, even though it is calculated at net (minus the discount).

Action: Payment Entered and Posted, Discount Taken

Because the discount is taken, and the system is set to account at gross, it is necessary to account for the discount at time of payment. The VAT amount is not adjusted by the discount.