Reconciling AP to GL with PO Prepayments

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Let’s assume a Purchase Order Prepayment is an asset to the company. It is money in the hands of the vendor until the delivery and invoicing of the goods or service, and is due back to the company if the PO is cancelled.

Since the PO Prepayment is considered an asset, the account assigned to the PO Prepayment is (in this case) a cash suspense account.

When reconciling AP to the GL while the POs with Prepayments are still open (not yet received/invoiced), the PO Prepayments are showing up on the AP Trial Balance reports with no way to easily remove them. The AP Historical Aged Trial Balance report no longer balances to the GL AP account(s). The subledger report and GL will not be in balance until the POs with Prepayments are fully received and invoiced, which may be many months in the future.

Has anyone else come across this issue, and how have you handled it?

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Frank Hamelly | MVP... 46,627 Moderator on at

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You need to include the cash suspense account, where you are recording the asset, in your AP Account Total. The sum of those two accounts should tie to the HAPTB if you have nothing but prepayments in the suspense account.

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callen 4,595 on at

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I think the issue is, while you are correct, many companies like to print the Balance Sheet/GL Trial Balance and the Payables Trial Balance and draw a single line from Accounts Payable to the Payables Trial Balance - and they can't. Now, you could modify the balance sheet to sum the AP account and the Suspense account.

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Heather Roggeveen 9,150 on at

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I agree with the others - totally based on reporting.

It would be the same scenario if operating multiple AP control accounts (e.g. if using Interfund).

I personally would ensure that the Cash Suspense account used was ONLY used for PO Prepayments. Then it is simply adding the two accounts together.

For users trying to balance the AP trial balance to the two GL accounts, you could also set up an Account Rollup Enquiry that includes the two accounts so they can just look in one place to see the balance. This enquiry can also be printed so you can show the balance of the two accounts linked with the AP Trial Balance. Again, a method I use for companies with multiple AP controls.

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callen 4,595 on at

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I like the account rollup idea. If only you'd spell Inquiry correctly. :-)

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Heather Roggeveen 9,150 on at

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Ahh - this is one of the differences in our countries. In New Zealand - we spell Enquiry with an "e" and chequebook instead of checkbook and creditor instead of vendor. I try and use mainly "American" spelling in this forum but forget sometimes :-)

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