Video instructions and help with filling out and completing Will Form 5495 Payable

Instructions and Help about Will Form 5495 Payable

Hi I'm Ralph with a noise Bay and I'm gonna explain what Accounts Payable does but before I begin we need to know how accounts payable or aap walks and talks the first step ap takes is deciding how to record its transactions notice I between a cash or accrual based method cash basis accounting is what we experience on an everyday basis the one in my wallet is the only money I have so when I purchase say a coffee I feel that purchase because I've given you the barista my dollars in exchange for a latte in accrual-based accounting however the money is transferred once goods or services are completed the difference here is that although we may not exchange actual folding bills that money has indeed transferred hands so for example I sell you a twenty pound bag of roasted coffee I'll leave an invoice saying you have 30 days to pay me back as far as I'm concerned I already have your money even though you haven't physically paid me in order for this to work we need to believe in the accounting equation which reads assets is equal to the sum of the organization's liabilities and equity is that another way a company is the accounting equation but let's make it a little simpler to follow we're going to ignore the equity part and focus on the assets and liabilities part with that we can introduce accounts payable but before we take another step just because accounts receivable is on the other side of the equals does not make it equal to accounts payable there are just different buckets in an organization holding time and money now that we've taken our first few steps with accounts payable we're ready to say our first words double entry bookkeeping that's what ap speaks that's how they record their history and they've been doing so that way for a long time it's kind of like the laws of physics but for accountants for every transaction there's an equal and opposite transaction here is a proper definition of double-entry bookkeeping I'll spare you from reading it and highlight the important parts but we need to redefine what a debit and credit is double-entry bookkeeping defines a debit as a current on the left side and a credit as occurring on the right side to put some context behind that we can think of a debit as incoming and a credit is outgoing but we're going to be real fast and loose on that part so just try to think of debit as a current on the left and credit as a crane on the right that will make sense in this next slide this is what the accounting equation looks like in double-entry bookkeeping speak I liken it to how something enters an organization and for that to happen the equation always needs to be true so if we use that same 20 pounds of coffee beans example from earlier from the perspective of the merchants Accounts Payable this is how that transaction played out they added 20 pounds of coffee to their inventory an asset occurring on the green plus or a debit on the left-hand side of the tee and a liability occurring on the red minus or a credit on the right-hand side of the team and that's why it's easier to accept the definition of a debit and credit as left or right respectively let's try a different example here at ralph corp we make salsa a single batch of our awesomesauce requires about a thousand pounds of tomatoes I buy some from a vendor at $1 per pound our books would balance immediately because I paid for those tomatoes on the spot I'd cut a check and get to making my salsa but I have a great relationship with my tomato vendor and we both walk and talk in a cruel based accounting the first step of that transaction looks very similar to the cash based method only instead of using my checking account I use you can't see what I'm doing but I'm doing finger Quotes I use accounts payable to pay so I accept a liability and ap in the form of a credit and my tomatoes as an asset 30 days later I'm ready to pay my vendor I pull out my checkbook and write a check in doing so I clear AP of that credit showing it as a debit and balance my books an awesome right so now that you can walk the walk and talk the talk of AP are you ready to walk a mile in their shoes here's when a job description from reads for a clerical position and accounts payable in one bullet point a person working ap is expected to pay vendors by monitoring discount opportunities verify federal ID numbers schedule and prepare checks resolve purchase orders contracts invoices or payment discrepancies and documentation ensure that credit is received for outstanding memos and issue stop payments or purchase order amendments that's a giant mouthful for just one bulleted item and that's why we're only going to focus on that one bullet point pays vendors by monitoring discount opportunities think of AP like a credit card again credit is a liability vendors and suppliers allow an organization to charge for a good or service and they'll repay with an agreed-upon time however vendors and suppliers may be willing to reduce the bill by a few percentage points if they paid a little sooner these discounts are advantageous to both parties because it helps accelerate cash flow and that always keeps everyone happy verifying federal ID numbers the master vendor file or mvf contains sensitive information such as banking routing numbers federal in tax IDs necessary to pay a vendor this mvf is this the list of vendors and suppliers and organization has done business with before and can be a point more fraud