Investigating and Resolving Discrepancies in the 'Other Transactions Affecting' Section of the Aged Accounts Payables Report
The 'Other transactions affecting the Account Payables account' number on the Aged A/P report often reflects entries that were posted directly to the accounts payables liability account outside the standard workflow. This may include non-standard items such as journal entries, manually-posted cash receipts, or other adjustments that typically indicate incorrect postings. Resolving these discrepancies ensures accurate reporting and accounting integrity.
Understanding 'Other Transactions Affecting'
The 'Other transactions affecting' line item captures non-standard entries that influence the Accounts Payables account outside the intended flow. Common causes include:
Journal entries
Expenses mistakenly posted to the A/P account
Manual adjustments or ad-hoc postings
Cash Receipts posted to the A/P account
These entries often result in inaccuracies and should not be used in determining the true balance of the A/P account. The accurate balance comes from the standard A/P activities displayed in the report.
Steps to Investigate Discrepancies
To pinpoint and address any discrepancies in the 'Other transactions affecting' section:
Run the Aged A/P Report: Start the report from an earlier period to identify when the balance first deviated unexpectedly. IE: run this report for each fiscal month to see when this figure had changed and the dollar amount of the change.
Note Unexpected Changes: Identify each fiscal period where the 'Other transactions affecting' or total balance shows unexpected changes.
Use Account Inquiry for Analysis: For each period with anomalies, run an Account Inquiry Report for the Accounts Payables account to view the detailed entries made during that period.
Identify Non-Standard Transactions: Focus on spotting irregular entries, such as ad-hoc journal entries, expenses booked (expensed) to the A/P account, or manual invoice adjustments using the A/P account as the offset account.
Corrective Actions
Once you identify the problematic transactions, take the following steps to correct them:
Reclassify incorrect postings to their appropriate accounts according to your company’s accounting policies.
Reverse any erroneous entries that should not have been made to the A/P account.
Validate corrections to ensure the account reflects only standard A/P activity.
Remember, journal entries should usually not be employed to adjust the A/P account unless under very specific circumstances.
Best Practices to Avoid Future Discrepancies
To ensure ongoing accuracy in managing the A/P account:
Limit direct postings to the A/P account to approved transactions only.
Regularly review and reconcile the A/P account to catch errors early.
Train staff on proper procedures for handling accounts payables and associated accounts.
By following these steps and maintaining disciplined processes, you can ensure the accuracy of your A/P account and prevent future discrepancies.