21st Century Accounting Tutorials - Payables

Configure Control Accounts

Control accounts are special accounts used in "accrual" accounting. Control accounts allow you to carry what the customer owes you as an asset and what you owe the vendor as a liability so that these business conditions are reflected on the Balance Sheet.

In Payables, the Payables control account contains the sum of the balances in all the vendor accounts that have been assigned that control account. You can set up multiple sets of Payables control accounts, including accounts for payables, discounts, and cash receipts, and assign the sets to appropriate vendors or groups of vendors.

When the user enters a vendor invoice, the system credits the invoice total to the Payables control account that belongs to the control account set assigned to the vendor. The system credits the vendor's "account" (the vendor's record, not a General Ledger account) and debits the expense accounts that you specify.

Select Arnold Plumbing if it isn’t already selected.

Run Payables/Configure/Control Accounts.

At least one set of all three accounts is required before you can set up Vendors.

The preconfigured set of control accounts that "came with" the company you created is perfect for Arnold Plumbing’s needs. You just need to review the set.

Name. A unique name identifies the set of control accounts.

Payables account. This is the G/L liability account to which all transactions will be posted for the vendor to whom you assign the set.

The Payables control account is equal to the sum of all vendor account balances. Vendor invoices, payments to a vendor, and adjustments are posted to the vendor account and to the Payables control account.

Discount account. This is the account to which all discounts will be posted for the vendor to whom you assign the set. The discount account is usually a contra-expense account.

Cash purchases account. This is the asset (cash equivalent) account to which all cash purchases will be posted for the vendor to whom you assign the set.

Use for occasional vendor purchases. You check this box if you want the system to use the cash purchases and discount accounts in this control account set for posting cash purchases from occasional vendors.

You can set up a separate set (thus a separate cash purchases account) for cash vendors or use one of the sets you use for regular Payables vendors.

Configure Control Accounts

Payables: Configure Control Accounts window