How accounts receivable and payable are recorded and closed

How accounts receivable and payable are recorded and closed

Every credit sale leaves a balance to be collected and every credit purchase leaves a debt to be paid. In Kardex Tauro those balances are controlled from the accounting module through two lists that complement each other: the accounts receivable (AR) list, which shows how much customers owe, and the accounts payable (AP) list, which shows how much the business owes its suppliers. Each account follows a clear cycle: it is born, receives payments, and is finally closed, and at every moment the list shows its status and its balance. This article walks through that cycle inside the program: when the account appears on its own, when it has to be created manually, which fields the creation window asks for, which validations protect the data, why an account stops being editable after its first payment, and how payments are recorded until it is closed.

The account that is born on its own: automatic origin

Many accounts require no manual entry, because the program itself creates them when the document that gives rise to them is finished. If, when a sales invoice is completed, the cash received is less than the invoice total, the system automatically creates an account receivable for the difference, that is, for the credit granted to the customer. If the customer pays nothing when receiving the goods or service, the account is born for the full amount; if the customer pays part, it is born for the balance that remains. In the same way, when a purchase order is completed with partial payment or on credit, the system automatically creates the supplier's account payable for the balance the business still owes. When the payment covers the full amount at the moment of the transaction, no account is created, because there is no outstanding balance.

These automatic accounts appear in the list identified by their source document: the sales invoice or the purchase order that generated them. That identification matters, because it lets you review the history from the document itself and keeps the traceability of the credit from its origin. Accounts born this way arrive in the Open state, with no payments recorded, and from that moment they follow the same cycle as any manual account: they are paid and closed from the account list.

When an account is created manually

Manual creation is reserved for balances that do NOT come from a sales invoice or a purchase order in the system. On the receivable side, it is used, for example, when a service was provided but was not invoiced in the program, when an advance payment was received that will be applied to future sales, when an accounting adjustment creates a right to collect, when a sale was made outside the system, or when interest or surcharges are charged to a customer. On the payable side, it is the way to record services received without a purchase order, pending operating expenses, debts taken on directly with suppliers, accounting adjustments that create payment obligations, or purchases made outside the system.

The practical difference between one origin and the other is traceability: an automatic account shows the number of the document that gave rise to it, while a manual account may show an empty field or the MANUAL mark and depends on its description and notes to stay well documented. For that reason, keep manual creation for the cases that truly require it and record everything else through the natural flow of invoices and purchase orders.

The creation window, field by field

To create a manual account you open the corresponding list and press the Create Account button. The CREATE ACCOUNTS RECEIVABLE window and its equivalent CREATE ACCOUNTS PAYABLE window share the same interface: the first manages collection rights with debtors, who are the parties that owe money to the business, and the second manages obligations with creditors, the third parties to whom the business owes money. The fields are the same in both:

• Document number: assigned automatically by the system and read-only; it cannot be changed or chosen.
• Status: reflects the moment of the account (Open, Partial or Closed) and is also read-only.
• Debtor or creditor: you type the third-party code or pick it with the search button, the magnifying glass, which opens the third-party list; once selected, the system shows the name automatically. It is required and must be a valid third party registered in the program.
• Description: text that explains the reason for the right or the obligation; it is required and should be descriptive, for example January consulting service, Advance for project or Computer equipment maintenance. A good description keeps the account identifiable months later.
• Obligation amount: total amount of the collection right or the debt; it is required and must be a positive number greater than zero.
• Amount paid: total of payments received or made; when you create a new account it is zero and it updates by itself with each payment; it is read-only.
• Balance to collect or to pay: calculated automatically by subtracting the amount paid from the obligation amount; when it reaches zero, the account changes to the Closed state.
• Start date: the date on which the right or obligation originates; by default it takes today's date and can be adjusted if it started on another day.
• Payment date: the deadline or expected date for collecting or paying; it is informative, helps with planning, and can be left blank when there is no defined date.
• OK button: the only button in the window; it creates the new account or saves the changes when you are editing an existing account in the Open state.

The same window is used for editing: from the list you select an open account and press the Edit Account button to correct the description, amount or dates. Editing is available only while the account has no payments.

Table 1. Does the account appear on its own or is it created manually?

What the system validates before saving

The creation and editing window enforces several validations that protect data integrity:

• The debtor or creditor must be a valid third party registered in the system; if you type a code that does not exist, the program shows an error. That is why it is recommended to use the magnifying glass to pick it from the third-party list.
• The description is required and cannot be left empty; it must contain descriptive text.
• The obligation amount must be positive and greater than zero; negative values and zero are not accepted. When editing an account that already has payments, the new amount must be greater than or equal to the amount already paid.
• The start date must be valid, and the payment date, when entered, must be on or after the start date.
• Only accounts in the Open state can be edited; if the account has already received payments, the system shows a message and leaves it unchanged.
• Deletion is also restricted: the Delete button is only active for open accounts with no payments recorded.

The states of the account

An account receivable or payable moves through four states during its life, and each one defines which operations it allows:

The account is born in the Open state, with a paid amount of zero. When it receives its first payment it moves to Partial if a balance remains, and when the amount paid equals the total amount it becomes Closed. If you delete an open account, the document moves to the Deleted state and remains only for historical reference. In the list, the lower detail grid follows this evolution: if the account is Open, the lower grid appears empty; if it was settled with a single payment, only one line appears; and if it was settled in several installments, one record appears for each payment, showing how the balance went down.

The first payment rule: why the account gets locked

The most important control in this module is the first payment rule: once the account receives its first payment, it can no longer be edited or deleted. This is not a whim of the system. Recorded payments are linked to the cash register, because every collection or payment moves real money, and if the amount, the third party or the dates of the account could be changed afterwards, the payment history would stop matching the cash movements and the balances already reported. An account in the Partial or Closed state therefore remains a historical record that must not be altered: it only accepts more payments, when it is Partial, or none, when it is Closed.

That is why every correction must be made in the Open state, before the first payment: review the description, the third party, the amount and the dates as soon as you create the account. If the mistake is discovered after payments have been received, the program does not allow correcting it from this window and says so with a message. In that case, the general recommendation is not to alter the history, to document the situation, and to consult the administrator or the accountant about the business correction policy.

How a payment is recorded from the list

Payments are recorded from the account list with the Record Payment button, and the procedure is the same for collections and for payments:

1. Open the accounts receivable list or the accounts payable list depending on the case.
2. Locate the account with the search box or the filters and select it in the upper list.
3. Press the Record Payment button; the payment recording window opens.
4. Type the payment amount: if it covers the whole balance, the account is closed at once; if it is smaller, the account stays in the Partial state and accepts more payments later.
5. Confirm the payment.
6. Check the result: the account changes to Closed or Partial, and the lower grid shows a line with the payment document number, the description, the amount, the resulting balance and the date.

Each payment generates its own document number, so the lower grid of the list shows the complete payment history of that account, line by line. When the payment belongs to an account receivable, the money enters the cash register; when it belongs to an account payable, the money leaves the cash register.

Table 2. Dated example: an account receivable with three payments

Each payment in this table was recorded as a line in the detail grid with its own document number, and the balance dropped from $2,000,000 to $1,200,000, then to $700,000 and finally to zero, when the account became Closed.

Table 3. Dated example: an account payable with two payments

The scheme on the payable side mirrors the receivable side: a debt can be settled in a single payment or in several partial payments, and the account only becomes Closed when the amount paid equals the total amount of the obligation. In the meantime, each payment takes the money out of the cash register and leaves its own line in the account detail.

The account and the cash register: reconciling payments

Accounts receivable and payable do not live in isolation: they are connected to the cash register. When a payment is recorded against an account receivable, the money enters the cash register, and when a payment is recorded against an account payable, the money leaves the cash register; the cash movements are linked to those collections and payments. A good reconciliation habit is to check, after each payment, that the corresponding movement appears in the cash register with the same amount and the same date.

It is also a good idea to reconcile balances with customers and suppliers periodically: with the third-party filter you can review all the accounts of one customer or supplier, including those already closed, and the View Report or Export to Excel options let you share or cross-check that information. The payment date, although only informative, helps you plan collections and payments for the period and project the cash flow: use date filters to see which balances are due soon and which ones have been outstanding for a long time.

Searching, filtering and reporting the portfolio

The list works as a master-detail form: the upper area shows the accounts and the lower area shows the payments of the selected account. At the very top there is a real-time search box: you only need to type the document number, the customer or supplier name, part of the description or the state, and the list filters itself; clearing the text shows all the accounts again.

The filter menu allows finer criteria, and the filters are stackable: several can be combined at the same time. For example, you can ask for all the accounts of one customer in the Partial state with an amount greater than one million, or all the accounts payable of one supplier with a date before a given day. The available criteria include source document, debtor or creditor, state, total amount greater or less than, and date greater or less than. The Clear Filters option restores the full view.

Everything shown by the filtered list turns directly into a report: the View Report option generates a printable document with exactly those criteria, ideal for collection follow-up meetings or payment planning meetings, and Export to Excel downloads the visible accounts to analyze them outside the program. The context menu also lets you edit the notes of the account and configure the visible columns, and the system remembers that configuration between sessions. With the Partial state filter you can spot at a glance the accounts with an outstanding balance, and combined with old dates it reveals balances that already need collection or payment action.

Frequently asked questions

• I made a mistake when creating the account, what do I do? If the account is still Open, use the Edit Account button to correct the description, the amount or the dates, or delete it and create it again. If it has already received its first payment, the system will not let you edit or delete it and will show a message; in that case do not try to force the change: document the situation and consult the correction policy with the administrator or the accountant.
• I received an advance from a customer, how do I record it? The program help indicates that advances received are recorded as manual accounts receivable, with a clear description such as Advance for project, and are applied later to the corresponding sales. Also record the reference in the account notes so you can reconcile the advance when the sale is invoiced.
• Can I close an account that still has a balance? No: the account only becomes Closed when the amount paid equals the total amount of the obligation, and once Closed it accepts no more payments. If the remaining balance should not be collected or paid, review it with your accountant before recording more movements, because the closed account stays as a historical record.
• Why can I not type the document number? Because the system assigns it automatically when the account is created and keeps it read-only. The same happens with the amount paid and the balance, which are calculated by themselves to avoid typing errors.
• When does the account close? At the very moment the payment that completes the balance is recorded: no additional operation is needed and you do not have to wait for a period end.
• Does an account created by mistake disappear on its own? No: while it is Open you can delete it with the Delete button, and the document stays in the Deleted state for historical reference. Once it has payments it cannot be deleted.

Good practices

• Prefer the automatic flow: invoice sales and register purchase orders in the program so that accounts are born on their own and keep their traceability. Reserve manual creation for the cases that really need it.
• Write descriptive, standardized descriptions for recurring cases, and use the Edit Notes option to document manual accounts and references to physical documents.
• Record advances received as accounts receivable with a clear description, so you can apply them later to the corresponding sales.
• Always correct in the Open state: review the description, the third party and the amount before recording the first payment, because after that payment the account can no longer be edited.
• Check the current balance before paying and document each payment with a description that makes future reconciliation easier.
• Use the payment date to plan collections and payments, and review the portfolio reports before authorizing new credit sales or new purchases.
• Reconcile balances with customers and suppliers periodically and review old accounts in the Partial state; filters combined with View Report turn that review into a printable document.
• Control permissions: not every user should be able to create, pay or delete accounts, and do not increase the record display period in the Settings too much, to avoid affecting system performance.

These options are operational tools to control balances derived from the daily operation of the business, not a formal accounting system: Kardex Tauro does not produce accounting ledgers or financial statements. For the official accounting of your company, consult your accountant.