CHAPTER 6 ACCOUNTS RECEIVABLE Simply Accounting for Windows is a powerful tool for creating invoices, recording and keeping track of accounts receivable, and registering the payments received on account. CHAPTER OBJECTIVES The purpose of this chapter is to show how to: Create, modify, and remove customers Process sales orders Record customer invoices Create archived transactions Process customer credit limits
176 Simply Accounting for Windows, v. 8 COMPANY INFORMATION Dixie Janitorial Services was established by Teflon Willie in 1989. After a rocky start, the business has been growing steadily. In the past he kept the General Ledger manually. He didn t worry about keeping track of his Accounts Receivable because he had few customers and it was easy to remember who had paid him. Recently there has been a significant increase in his business and Teflon is not sure any more who has, and who has not, paid. Teflon has approached you to analyze the Accounts Receivable to determine the amounts owed and invoices outstanding by customer. He then wants you to record the transactions using Simply Accounting for Windows. HARMONIZED SALES TAX Harmonized Sales Tax (HST) began on April 1, 1997 in New Brunswick, Nova Scotia, and Newfoundland. The HST replaced the Goods and Services Tax and provincial sales taxes in the participating provinces. The harmonized tax rate is 15% and applies only to taxable goods and services sold in or delivered to the participating provinces. HST does not apply to sales outside of the participating provinces, but GST does. Businesses keep only one set of sales tax records and complete only one return for each reporting period. They do not have to report and remit GST and HST separately. If a business in the participating provinces has taxable goods delivered from elsewhere in Canada, it will have to pay HST and input tax credits may apply. D the Simply Accounting icon from the Windows 95/98 desktop the Select an Existing Company option button In the Open Company window: Select: Dixie to accept the Session Date Only three of the modules are active on your screen as displayed by Figure 6-1. The remaining accounting functions will be displayed in later chapters as you deal with the other modules.
Accounts Receivable 177 FIGURE 6-1 Dixie s Main Menu Note the icons available in the Receivables column. The first, Customers, allows you to administer the files for the customers to whom you sell goods and services. The Sales, Orders & Quotes icon allows access to record sales of goods on credit or for cash. The last item, Receipts, allows you to record the payment of invoices as they fall due. CREATING CUSTOMER RECORDS Before you can record sales to customers, you have to create customer records. Customers can be created both using the Customers option or on the fly as you record sales invoices. If the company is a customer to which you expect to make regular sales you should use the Customers option to create complete files. D The Customers window will appear as displayed by Figure 6-2.
178 Simply Accounting for Windows, v. 8 FIGURE 6-2 Customers window The screen shows that five customers have been set up. There are two different ways of creating customers in this window. You can click the Create icon from the icon bar or select File from the Menu Bar, then click Create. the Create icon The Receivables Ledger Vendor Records notebook will appear as displayed by Figure 6-3.
Accounts Receivable 179 FIGURE 6-3 Receivables Ledger Records notebook The Receivables Ledger Records notebook allows you to create, delete, or modify customer records. You can use the E-Mail icon to send a note by e-mail to a customer, or even click the web site icon if you want to visit the customer s web site. Note that there are six tabs at the top of the input pages to record information about the customer. These will be discussed in order. The first customer you will record is Maragin Ltd. Maragin Ltd. Kimkelina Mist in the Contact field 4435 Gridlock Ave. in the Street Field Halifax in the City field
180 Simply Accounting for Windows, v. 8 Nova Scotia in the Province field B3J 4S2 in the Postal Code field 506-555-3085 in the Phone field 506-555-3086 in the Fax field If the customer has an e-mail address, you can enter it in the E-mail field. It is used in conjunction with the E-Mail icon at the top of the screen. (Note that the e-mail and web site addresses that follow are fictitious and will not work.) maragin@hotmail.com http://www.maragin.com Review your completed screen. It should appear the same as Figure 6-4.
Accounts Receivable 181 FIGURE 6-4 Completed Customers Records window If you have made a mistake you can correct it by clicking and highlighting the text in question and retyping the information. If you have any mistakes, correct them now. the Ship-to Address tab You use the Ship-to Address to identify the contact person and address to whom you normally ship products for this customer. The address is displayed on sales invoices, orders, and quotes, and may be different from the one you specified on the Address page. Dixie Janitorial Services could have a contract for which they clean an office in Halifax, but have to send the bill to a central office in Dartmouth to obtain payment. In this case the billing and cleaning addresses are the same. the Same as mailing address check box to activate it. the Options tab The Options page of the Receivables Ledger Vendor notebook will appear as displayed by Figure 6-5.
182 Simply Accounting for Windows, v. 8 FIGURE 6-5 Options Page The upper portion of this page is used to record the payment terms applied to this customer when Dixie Janitorial Service sends invoices. The lower part is used to define housekeeping functions you require to administer the invoices. No discount is offered to this customer. The net amount of the invoice is due within 30 days. the % discount if paid within box 0.00 twice 30 in the Net amount due within days field
Accounts Receivable 183 Clear Transactions When Paid The Clear Transactions When Paid option instructs the program to delete an invoice and the accompanying payment once it has been fully paid. The advantage of this is that the customer report does not become cluttered. You can choose to leave the paid invoices on the report and manually delete them when you want. The advantage of not clearing paid invoices is that you can adjust invoices where there have been errors by using the automatic features of Simply Accounting. In discussions with Teflon, it has been decided that the paid invoices should not be cleared automatically once paid. Include in HST Report The Include in HST Report field is activated if you want to include the HST you paid in the HST Report. The field should already be active. Print Statements for This Customer You can choose to send or not to send statements to a customer. The standard procedure is to send statements monthly to all customers. Confirm: that the Print Statements for This Customer check box is active Forms for This Customer You have the choice of either printing and mailing purchase orders to customers or sending them by e-mail. Select: the list tool for the Forms for This Customer check box Print the Activity tab The Activity page should appear as displayed by Figure 6-6.
184 Simply Accounting for Windows, v. 8 FIGURE 6-6 Activity page The Year-to-Date Sales and Last Year s Sales are displayed for information only. You can fill in these fields only when entering History. You can set a credit limit for any customer in the Credit Limit field. The program will alert you if the customer has exceeded the credit limit. Credit Limit field Enter: 1000 the Memo tab The Memo page will appear as displayed by Figure 6-7.
Accounts Receivable 185 FIGURE 6-7 Memo page You use this page to record any notes you want to keep about this customer, for example anything you want to discuss the next time your sales representative calls. The To-Do Date field is used to record the date you want the memo to appear in the To-Do Lists window. If you want the memo to appear immediately, you leave this field blank. The To-Do Lists window displays only the memo s first 40 characters until you select to view the whole memo, so you would probably summarize longer memos in the first 40 characters. If you want the memo to appear in the To-Do Lists window, you have to activate the Display this memo in the To-Do List check box. the Import/Export tab The Import/Export page appears as displayed by Figure 6-8.
186 Simply Accounting for Windows, v. 8 FIGURE 6-8 Import/Export page The This customer has Simply Accounting and can import invoices and quotes check box is activated when the customer has e-mail and uses Simply Accounting. The customer can import your invoices and quotes electronically. You activate this check box to be able to export invoices and quotes to this customer. The This customer uses my item numbers on orders check box can be activated if this customer uses the same product codes as you. If the customer uses product codes that are different from yours, you enter them in the lower portion of the screen along with your corresponding product code numbers for all items you sell to this customer. If you sell non-inventory items, you match the customer s item number with your General Ledger revenue account. If you do not want to make any further sales to a customer, you can make their file inactive by activating the Inactive Customer check box. You have now finished creating the data records for this customer. Before you leave this window you must save the file. Close: the Receivables Ledger notebook The customer you have just created now appears on the Customers window as displayed in Figure 6-9.
Accounts Receivable 187 FIGURE 6-9 Customers window MODIFYING VENDOR RECORDS Teflon has learned that he will be getting additional business from Computer Education Associates. After speaking to their bank manager he has decided to increase their credit limit to $1,500. D Enter: Close: Computer Education Associates customer icon the Activity tab $1500 in the Credit Limit box the Receivables Ledger Writing over the details recorded in customer accounts will change the customer record. Any field that shows as an open space may be edited. Areas which contain history and program-produced information are displayed in grey and cannot be edited. If you are recording a sale or cash receipt and you open the customer record, you can view the information, but you cannot change it.
188 Simply Accounting for Windows, v. 8 REMOVING A CUSTOMER After setting up Maragin as a new customer, Teflon has been informed by Kimkelina Mist that his prices are too high and that she will be using a different janitorial service. D the Maragin Ltd. customer icon The Remove the Current Customer icon from the toolbar A confirmation dialog box will appear as displayed by Figure 6-10. Customers can only be removed when invoices and receipts relating to them have been cleared from the system. FIGURE 6-10 Simply Accounting confirmation Another dialog box will appear, enquiring if you want to clear the lookup data for this customer. You have not recorded any transactions to this file. A third dialog box appears, telling you (what you already know) that there is no invoice lookup data to clear. Close: Close: Highlight: the Receivables Ledger the Customers window Maintenance from the Menu Bar Clear Paid Transactions
Accounts Receivable 189 Clear Paid Customer Transactions... The Clear Paid Customer Transactions dialog box appears as shown in Figure 6-11. FIGURE 6-11 Clear Paid Customer Transactions dialog box This screen allows you to clear invoices that have been paid from the system. You can clear the paid invoices for all of your customers at once or select a single customer. You can also choose a date after which invoices will not be cleared. Select: Bob s Bistro A Simply Accounting warning message appears reminding you to make a backup of your files and to print all required reports. Backing up your data files is an important activity. Whenever the program suggests that you should perform a backup, you would be well advised to do so. In this simulation you will proceed without backing up the data files.
190 Simply Accounting for Windows, v. 8 A message will appear informing you that there are no invoices to clear. ACCOUNTING FOR SALES The General Ledger and Accounts Receivable have been set up as of the first day of the year. The current date is now January 17, 2000. When instructed, you should back up your data files, since you normally have information in them. Maintenance Change Session Date... You would normally back up your system to protect the data you have entered since your last backup. In this case, you don t need to create a backup. When the warning message appears enquiring if you want to back up your data files: 01/17/00 Because you have entered a date that is more than one week into the future, you will see a date warning message. The date you have entered is correct, so you can proceed. Close: Close: the Checklists window the To-Do Lists window Sales Orders A Sales Order is a written request from a customer (it s the customer s purchase order) giving you permission to sell items or services to your customer. The first Sales Order you will record is to Maritime Industries for Office Cleaning Services for the next 12 months. The service is to be billed monthly at the rate of $500 per month. The same Sales Order number will be used for the entire year.
Accounts Receivable 191 D The Sales Journal window will appear as displayed by Figure 6-12. FIGURE 6-12 Sales Journal window This window is divided into three parts. The top portion is used to record information about the customer, the location to which the goods are to be shipped, the quote number, the invoice number, and the current date. The middle section is used to record the goods ordered and the price, and the lower portion is used to record the sales taxes, freight, and terms. The terms are related to the customer. When you enter the customer name, the terms associated with the customer will appear. Select: the list tool for the Transaction field (located under the icon bar) Sales Order Notice that when you changed the transaction to a Sales Order, the Ship Date field appeared, the invoice number field vanished, and the background colour changed.
192 Simply Accounting for Windows, v. 8 Select: the Sold To list tool Maritime Industries Ltd. You record a customer s Purchase Order number in the Order/Quote No. field. The purchase order number sent by Maritime Industries is 00-1382. the Order/Quote No. field 00-1382 The Ship Date is usually the date that the customer wants to receive the goods. 1/31/00 You record in the Date field the date the sales order was placed. The current Session Date is displayed and does not require changing. twice The program has skipped over the Item and Ship fields because the Inventory module is not active. The Item field is used to record your inventory item code. The Order field is used to record the quantity of items ordered; it must be filled in. 1 The order amount you recorded in the Order field will appear as a back order, because the goods have not been delivered yet. This field cannot be left blank. The Unit field is used to record the units in which the company makes sales. For example, if the sales order were for 100 dozen tent pegs, the unit would be recorded as Dozen. In this case you are selling 1 month of janitorial services, so the unit is Month. Month
Accounts Receivable 193 The Description field is used to add a physical description of the goods sold. Janitorial Services In the Price field: 500 twice When you added the price per month, the Amount field automatically displayed the extended value. The HST field is used to record the Harmonized Sales Tax. You access the HST Codes by pressing the Enter key. Enter The Select HST window will appear as displayed by Figure 6-13. FIGURE 6-13 Select HST window Certain goods and services are HST-exempt or zero-rated, for example food, pharmaceuticals, or financial services. If you are recording a product that is HST-exempt, use code 0 or 2. If the item is HST-nontaxable, use code 1. If the HST is already included in the sales price, use code 4, and if the HST is not already included in the sales price, use code 3.
194 Simply Accounting for Windows, v. 8 Select: Code 3 HST @ 15.0%, not included The HST @ 15.0% at the bottom of the screen shows the extension of the HST rate times the dollar value of the sale. The cursor skips over the PST tax field because the HST option is active. Other provinces record the GST and PST separately, so the cursor would stop at the PST field and you would record the appropriate rate. The final step is to record the General Ledger account that will be charged with the sale. Enter The Select Account window will appear as displayed by Figure 6-14. FIGURE 6-14 Select Account window You can scroll through all of the General Ledger accounts, then select the account appropriate for the journal entry. In this case you are contracting a sale to an industrial location, so account 4110 Industrial Jobs will be chosen. Select: 4110 Industrial Jobs The completed sales order should appear as displayed by Figure 6-15.
Accounts Receivable 195 FIGURE 6-15 Completed sales order Once you are sure that your sales order is correct, you have to record it. As soon as you record the sales order the screen clears in preparation for the next entry. Close: the Sales Journal - Sales Order window Change: the Session Date to 1/31/00 RECORDING SALES Sales are recorded using the Sales, Orders & Quotes icon in the Receivables module. D
196 Simply Accounting for Windows, v. 8 The first invoice is to Computer Education Associates for monthly cleaning services. This is a small, locally owned company that does not issue purchase orders, so Dixie Janitorial Services has not recorded a sales order. The Transaction field at the top left defaults to Invoice whenever you start the program. Ensure: the Transaction field indicates Invoice You have three payment options when recording an invoice: pay later, pay immediately by cash, or pay immediately by cheque. The next few invoices will be recorded using the Pay Later option. Ensure: Select: Pay Later is displayed in the Paid By box the list tool for the Sold To field Computer Education Associates Invoices are prepared in sequential order, beginning with the number you assigned on the Forms page of the Settings option on the Menu Bar. A number of invoices were recorded at the end of 1999. The invoice number displayed should be 6. The date of the invoice is January 31, 2000. Ensure: 1/31/00 is displayed in the Date field You have the option of recording either the current Session Date or a prior date in the Date field. The payment terms are calculated from the date you record here. Remember, in this case you cannot record an invoice at a date in advance of the Session Date. the Ship field 1 Dixie Janitorial Services bills Computer Education Associates on a monthly basis, so the unit description will be Month. Month January 2000 janitorial services
Accounts Receivable 197 750 Select: Select: twice Enter to obtain a listing of the HST options Code 3 - HST @ 15.0%, not included Enter to see the accounts listing 4100 Commercial Jobs The completed Sales Journal will appear as displayed in Figure 6-16. FIGURE 6-16 Completed Sales Journal
198 Simply Accounting for Windows, v. 8 ARCHIVING AN ENTRY Many of the invoices you send will be repeated frequently over the year. Whenever you have a transaction for any one customer that will be repeated frequently, you can place it in an archive so you do not have to look up all the details each time. The Store Recurring Transaction dialog box will appear as displayed by Figure 6-17. FIGURE 6-17 Store Recurring Transaction dialog box Simply Accounting for Windows moves the recurring transactions to the top of the list on the basis of the frequency indicated and the current Session Date. Invoicing to Computer Education Associates is sent monthly, so the frequency should be set to Monthly. Select: the list tool for the Frequency field Monthly DISPLAY SALES JOURNAL ENTRY When completing an entry in any of the modules, it is advisable to review the entry you have created before it is posted. Report from the Menu Bar Display Sales Journal Entry
Accounts Receivable 199 The Sales Journal entry is displayed in General Journal format as in Figure 6-18. FIGURE 6-18 Sales Journal Entry window The entry indicates a credit to account 2370 HST Charged on Sales. This is a liability account, so it should be a credit; 4100 Commercial Jobs is a revenue account, so it should be a credit; and the Accounts Receivable represents an increase in assets, so it should be a debit. Close: the Sales Journal Entry window Once you post the transaction the screen clears in preparation for the next invoice. CHANGING CUSTOMER CREDIT LIMITS Record: the following invoice: 31 January The company billed the Office Furniture Store for the monthly janitorial services, $750 plus HST. Allocate the revenue to Account 4100. Display: Post: the Sales Journal Entry to ensure it is correct the Office Furniture Store invoice As soon as you click the Post icon, a Business Advisor window appears. This transaction caused the customer to exceed his or her credit limit and you are given the option to proceed or not. With the janitorial services already performed, you will invoice the customer. Your subsequent actions will be to adjust the credit limit in the customer record to suit an appropriate level for his or her business or to modify the services that you provide to the customer. Until the customer makes payment on his or her account, all further invoices will produce this warning. Also, should you record a quote or create a sales order for the customer, a similar warning will appear. If you have a customer with a poor credit
200 Simply Accounting for Windows, v. 8 history, it is preferable to know about the problems when the sales order is received, rather than after the goods or services have been delivered. Close: the Sales Journal EXERCISES DIXIE JANITORIAL SERVICES 1. Create the following new customers for Dixie: Reno s Rewards E. Presley 35 Harmony Road Halifax Nova Scotia V3Y 3L7 (506) 555-4568 (506) 555-7896 reno@reno.ca Ship-to address is the same Terms: 30 days Include in HST report Credit Limit: $1,500 Julie Juno Inc. Julie Juno 23 Songstress Road Halifax Nova Scotia V3Y 3L5 (506) 555-7832 julie@sympatico.com Ship-to address is the same Terms: 1 day Include in HST report Credit Limit: $0 Reba s Routines R. Hatfield 2 Workout Road Halifax Nova Scotia V3Y 3M2
Accounts Receivable 201 (506) 555-7852 (506) 555-4587 reba@reba.ca Ship-to address is the same Terms: 30 days Include in HST report Credit Limit: $2,000 2. Record the following sales for Dixie: 4 January Sales Invoice 8 Reba s Routines Weekly cleaning services $200, HST $30, total invoice $230. Set this up as a recurring invoice, weekly. Allocate revenue to account 4100. 8 January Sales Invoice 9 Julie Juno Inc. Emergency cleaning $500, HST $75, total invoice $575. Allocate revenue to account 4100. 11 January Sales Invoice 10 Reba s Routines Cleaning services $200, HST $30, total invoice $230. Recall the recurring invoice. 3. Create a sales order for Reno s Rewards. The sales order is created on January 5. The service is to start January 15. Cleaning services will be provided for one day each week starting on the 15th of this month. A day s work for the crew will be billed at $200 a day. The sales order number RR 000107, is a firm commitment for a year. Set it up as 52 days, one day a week. The sales order of $10,400 with $1,560 HST totals $11,960. Allocate revenue to account 4100. Exit: Simply Accounting