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How to separate trade and non-trade creditors in Accounts Payable?

posted Jan 13, 2009, 10:03 PM by Unknown user   [ updated Jan 14, 2009, 2:54 AM ]
Trade Payables
Definition - payables which are related directly to the company's primary operations.
Examples of trade creditors - suppliers for raw materials, suppliers for other inventories received and payables for services rendered.
Category - Accounts Payable / Trade Payables.
Non-Trade Payables
Definition - payables which are not related directly to the core operating business of the company.
Examples - utility bills, taxation and salary.
Category - Other Payable / Accruals.
What is done previously:
Credit memos were created to calculate the amounts owing to suppliers irrespective of whether they trade or non-trade payables in the same Accounts Payable. This creates a problem where it is difficult to ascertain the correct amount in these different categories from the generated reports.
Solution 1:
  • Perform a Reverse on the Credit Memo to cancel out the credit memo previously created to record the amount owing to supplier.
  • It would be a mistake to use the credit memo because the Accounts Payable will automatically be credited with the amount. As can be see below:

  • Therefore, it would be correct to pass Journal Transactions to record the non-trade payable under 'Other Payable' instead of Accounts Payable.

Expenses / Utilities 
Other Payable / Accruals

Solution 2: