Creditors and Debtors Balances

General Ledger (GL) Opening Balances are required for Balance Sheet accounts as at the commencement of the current Tax year. These balances are essential as the basis of all financial reporting. Amongst these balances are two control accounts, namely Debtors and Creditors.

The Debtors and Creditors account balances must be supported by transactions in the system. The formal end of year accounts (Tax Accounts) should contain Debtors and Creditors Schedules, i.e. a list of amounts payable by the Debtors, and a list payable to the Creditors.

If the system is being started from scratch, then an invoice should be posted equivalent to the net amount outstanding for each Creditor. The posting date should be the 30th June of the year prior to the current year. It is recommended that Creditors invoices are posted typically to the GENLED job, which is linked to the General Ledger bank of cost centres, with a cost centre called Balances Brought Forward and a code of say BFWD. If transaction detail is required then the individual outstanding invoices for each Creditor should be posted.

In the case of Debtors, it is recommended that a Claim is posted for the total value of claims issued to 30th June and similarly a Receipt. Therefore the net of these two entries should represent the amount outstanding for that Debtor at the end of the year. Once again if transaction detail is required then the individual claims and receipts should be posted for each Job/Debtor. It is recommended to also post claims and receipts for all contracts that are ongoing beyond 30th June.

Run a Creditors Summary from e.g. 1/07/2001 to 30/06/2002. The Opening Balance column of the summary should equal the GL Opening Balance for Creditors and the Closing Balance on the summary should equal the Creditors balance on the Trial Balance and Balance Sheet for the end date.

Similarly, run a Debtors Summary from e.g. 1/07/2001 to 30/06/2002. The Opening Balance column of the summary should equal the GL Opening Balance for Debtors and the Closing Balance on the summary should equal the Debtors balance on the Trial Balance and Balance Sheet for the end date.

Some integrity checks to perform on the system before running the previous reports:

Perform a Find Orphan Transaction search and fix any missing or incorrect codes. There may be orphan transactions relating to cancelled cheques. These however do not affect balances as they should be zero amounts. A suggestion is to create a Supplier with a code of Cancel and a name of "Cancelled & Void Cheques", this code already exists in the sample databases.

Compare the Creditor Summary report (all dates) to the Unpaid Invoice Summary (all dates) report. The totals should agree on both reports and if they differ then check the Creditor Detailed report for each incorrect Creditor. Report Logic: the Creditor Summary prints the total of all invoices and payments for each Creditor. The Unpaid Invoice Summary prints the total of invoices that have a Closing Transaction number of 0. The Closing Transaction number on a paid invoice will be the transaction number of the Payment. This number is the only means by which the system can determine whether an invoice is paid or unpaid.

To correct differences between the Creditor Summary and Unpaid Invoice Summary: print a Creditor Detailed report for each incorrect Creditor with All Dates selected. Check that all invoices add up to their corresponding payments.

When you discover missing invoices, post them through the Invoice posting screen, dating them as per the invoice details. In the Audit Trail (Edit Transactions) screen, locate the invoice you have just posted and go to the Closing Transaction column relating to that invoice. Enter the transaction number of the Payment that has paid the invoice. You can find the transaction number on the Creditor Detailed report.

1.	If the opening balances are the same, check your orphans again and make sure they are not having an effect. You check orphans by going into Edit drop down in main screen – Find Orphans – SELECT TRANSACTIONS and press the binoculars.

2.	Make sure you have rebuilt your GL data and used the correct until dates in both the summary and the Balance Sheet in the GL, remember that the 'until' dates in your Balance Sheet are at the bottom of the GL reports screen.

HINT! - Review the Creditors Summary to the 30th June. If there are negative balances then these should be verified. They can exist for two reasons: a. At the end of the financial year there were Credit notes against these suppliers. or b. Invoices have been deleted, and therefore do not equal the payments anymore and your balances are incorrect. These should be corrected as discussed earlier in this document.