Balancing Accounts Payable for Audit

Balancing Accounts Payable for Audit

At the beginning of our fiscal year, many of us switch to recording invoices under an accrual basis of accounting.  You may ask what "accrual" even means.  It means that you charge the invoice to the year in which goods or services were received or rendered.  For example, let's assume my fiscal year-end is December.  I had some cleaning services done in the month of December but didn't get the invoice until January.  Under the accrual basis of accounting, that invoice should be charged back to the prior fiscal year because that was when the services were rendered.  This is true even though we are entering and paying that invoice in January.  To do this, we can switch to Accrual in Accounts Payable by following the steps in our Accounts Payable Fiscal Year-end Checklist.

When we charge those invoices back to the prior fiscal year, the system records the invoice to the expense account and then holds those invoices in an accounts payable account until payment is rendered.  You will want to balance those accounts payable accounts in each fund as a part of your preparation process for your audit.  The following steps will assist you in doing just that.

Printing the Unpaid Invoice Report

Before we actually do the balancing, we need to know what the Accounts Payable module thinks should be in each one of our accounts payable accounts.  Follow these steps to generate a report that will give us those numbers.  This is also a great report to provide to your auditors.
  1. In Accounts Payable, go to Reports | Unpaid Invoice Report.
  2. Click on the drop-down at the top and select the report titled "Unpaid Invoice Report - by Fund" or something of the like.  This report will produce a report that breaks down how much should be in the accounts payable accounts in each fund.  If a report with this title or something similar doesn't exists, click here for instructions on how to create the report.
  3. Change your Report dates to the 13th period of your current fiscal year (e.g. 13/YY)
  4. Click the Print or Print Preview button on the toolbar.

What are my accounts payable accounts?

As you scroll through the report, you will see each invoice that was charged back to the fiscal year along with a total for each fund.  Those totals are what we will use to compare to our accounts payable accounts in the General Ledger.  If you are unsure as to which accounts the system uses for your accounts payable account in each fund, follow these steps.  Otherwise skip to the Balancing section. 
  1.  In Accounts Payable, go to Organization | Organization.
  2. Click on the Interfaces tab.
  3. Click on the General Ledger subtab.
  4. Look at the Accounts payable account.  You will see a "masked" account number.  For example, if the account number is "FF-21100", the account number being used by the system is "21100" in each fund. Make note of this for the next section.

Balancing

To balance our accounts payable accounts, we will simply create a Trial Balance report for the end of our fiscal year with these accounts on it.  We can then use this report to quickly compare to our Unpaid Invoice report.  You may already have a report like this setup.  If not, follow these steps:
  1. In General Ledger, go to Reports | Trial Balance.
  2.  Click on the drop-down at the top and select the report titled "Trial Balance - by Account Number [Caselle Master]".
  3. In the Selection criteria section, double-click on "All" under the Value column next to "Account.Account number".  An Enter Values screen should popup.
  4. We need to use the Like command followed by the accounts payable account that the system uses.  For example, if my accounts payable account is "21100" in each fund as I found in the What are my accounts payable accounts? section above, I would use "{like}%21100".  The percent sign acts as a wildcard telling the system to find any accounts that end with "21100"
  5. Click OK.  
  6. Change the Report dates to "14/YY" (e.g. 14/21).  We will use period 14 instead of 13 here to identify if any entries may have been manually made in period 14 by any users.
  7. Under the Report Order section, uncheck the Title, Total, and Page check boxes on the "[Report].Fund" row.  
  8. Click the Save button on the toolbar and select Save as new report and give it an appropriate title (e.g. "Accounts Payable").
  9. Click OK.
  10. Click the Print or Print Preview button on the toolbar to generate the report.
You can now use this report to compare your balances for each fund to the Unpaid Invoice report generated in the first section.  Your Unpaid Invoice report will have totals by fund.  Find those totals and compare to the appropriate fund on your Trial Balance report.

If there are discrepancies, further investigation will need to take place.  Look at the detail for the account in question and see if there are any manual entries that have been entered to that accounts payable account.  You should only see AP and CDA journal code entries in the account.  If you see other types of entries, those entries will cause the two (2) reports to not match.  If the entries were intended to be made to that account, you will need to communicate this to your auditors to let them know why the two (2) reports do not match.  If the entries were made to the accounts payable account in error, make a journal entry to reclassify the entry or entries to the proper account.