How to Process A/R Prepayments in MIP Fund Accounting v14.0

What’s New

Processing A/R prepayments has changed in MIP Fund Accounting v140.0

With v14.0 of MIP Fund Accounting you can no longer enter prepayments at

Accounting>Transactions>Enter A/R Credits. Instead A/R prepayments are entered at

Accounting>Transactions>Enter A/R Receipts.

Summary Processing prepayments still requires three steps, as in previous versions, but those steps will be carried

out in a new way in v14.0 of MIP. In summary, the three steps are:

1. Enter and post the A/R prepayment at Accounting>Transactions>Enter A/R Receipts.

2. Subsequently, enter and post an A/R invoice. The invoice or invoices may be developed through

Accounting>Activities>Manage A/R Billing (an ARS type transaction) or through

Accounting>Activities>Enter A/R Invoices (an ARB type transaction).

3. In a third transaction, you will create a document in which you will match the prepayment with

one or more A/R invoices. In version 14.0 this is done only at Accounting>Transactions>Enter

A/R Credits (an ARM transaction).

Note 1: You cannot apply a prepayment to an invoice on the invoice itself; you cannot show the

prepayment directly on the printed invoice. You must employ the three steps above.

Note 2: All of these procedures are recommended procedures. You should confer with your chief

accountant or accounting advisor if you have questions about how to adapt these recommendations to

your specific accounting system. For example, you may use different AR Control GL accounts to control

A/R invoices and A/R prepayments. Or you may use the same AR Control GL account for both kinds of

documents.

Note 3: Processing prepayments will be made much easier if you first setup a few things, things you

should only need to do once.

Note 4: Processing AR receipts in an Enter A/R Receipts session will actually produce two separate,

linked sessions with the same session ID if you enter both regular receipts and prepayments in the

session. The system will save one session containing ARC documents (regular AR receipts) and one

session containing ARP documents (A/R prepayments). The separate sessions can be observed at

Accounting>Activities>Manage Sessions>Post Transactions, and they cannot be posted independently;

they must be posted at the same time.

In Administration setup the following:

Prepayment Default GL Account Code to be used as the default A/R account when entering A/R

Prepayments

In Accounting setup the following:

Select customer-specific Prepayment Account if you decided that should be different from the

default prepayment account you setup in Administration

Setup a special Offset Account Assignment to make entering your A/R prepayments easier.

Setup a special Distribution Code to be used only for entering A/R Prepayments

Setup a GL account to be used for Clearing when matching prepayments against invoices.

Setup a special Offset Account Assignment to make matching prepayments with invoices much

easier, step 3 in the above Summary.

Detail of Setup items (This entire article is based on the NTO sample database.)

Administration setup:

Prepayment Default GL Account Code to be used as the default A/R account when entering

A/R Prepayments

Administration>Set Up Modules>A/R, select the A/R Control GL Account Code which will be used as the

default credit to A/R when entering prepayments.

Accounting setup:

Select customer-specific Prepayment Account if you decided that should be different from the

default prepayment account you setup in Administration

Accounting>Maintain>Customers

On the Default Coding tab of any specific customer you may select a customer-specific Prepayment

Account to be used instead of the default account you setup in Administration. You may also choose to

leave it blank in order to just use the default account you setup I Administration.

Setup a special Offset Account Assignment to make entering your A/R prepayments easier.

This article assumes you already have an A/R Control GL account to which A/R invoices are debited and

to which A/R receipts are credited. GL account 16301 in the NTO sample database is used as the

example A/R Control GL account in this article. Whether you use an existing A/R Control GL or you

create a new A/R Control GL just for prepayments is up to your chief accountant.

Accounting>Maintain>Offset Account Assignments and click the wizard icon .

Click the dropdown arrow to select the new ARP transaction source. Then click Next.

On the following panel of the wizard select your Fund code. Then select the A/R Control GL account to

which your A/R prepayments will be credited. Move that A/R Control account to the right, under

Selected Items. Do not choose any account type other than AR. Then click Next.

On the following panel of the wizard select your Fund code. Then select the Cash GL account to which

your A/R prepayment will be debited (this is the Offset Account Assignment). Move that account to the

right, Selected Items. Then click Next and Finish.

You may want to Copy that offset account assignment to other Funds as when creating other Offset

Account Assignments.

Setup a special Distribution Code to be used only for entering A/R Prepayments

Since you will be using only balance sheet type accounts in the prepayment transaction, you should

populate only the balancing segment fields in the distribution.

Accounting>Maintain>Distribution Codes

Notice the Non-balancing segments have been left blank in the above screen shot.

Setup a GL account to be used for Clearing when matching prepayments against invoices.

This is because the entries in your transactions to match prepayments with invoices must have

offsetting entries to some other account, a clearing account.

Accounting>Maintain>Chart of Account Codes and click the wizard icon . Then complete the

process of setting up the account you will use.

The GL account you create might be an ARO type account (Accounts Receivable) or an OA type account

(Other Asset), with an account code that is near your A/R account codes. Other account types can be

used, but ARO or OA may be the most logical type. In this article GL account 16700 was created in the

NTO sample database for this purpose.

When creating this account, do not copy Offset Account Assignments from a model account.

You may also use an existing ARO or OA account if you don’t want to create a new one dedicated to A/R

prepayments.

Setup a special Offset Account Assignment to make matching prepayments and invoices much

easier, step 3 in the above Summary.

Accounting>Maintain>Offset Account Assignments, then click the wizard icon .

Click the dropdown arrow to select the ARM transaction source (A/R Credits). Then click Next.

On the following panel of the wizard select your Fund code. Then select all of your AR Control GL

accounts, AR type. Move those A/R Controll accounts to the right, under Selected Items. Do not choose

any account type other than AR. Then click Next.

On the following panel of the wizard select your Fund code. Then select the AR Prepayment Clearing

account to which your transactions will be offset, the “other side” of each prepayment and invoice in

the matching prepayment and invoice. Move that account to the right, Selected Items. Then click Next

and Finish.

It is very important that you setup Offset Account Assignments for A/R Credits (ARM) for all of your

AR type GL accounts, not just the AR account that prepayments will be credited to. The importance of

this will become apparent when you matching prepayments with invoice during actual processing,

and it is the key to simplifying the processing of AR prepayments.

Processing A/R prepayments, now that you have completed setup tasks: 1. Entering A/R Receipts to record prepayments after you have completed all setup task

Accounting>Activities>Enter A/R Receipts

Create a new session and click Start. Populate the fields in the document header section as usual.

When you tab away from the Customer ID field or when you click the Choose Invoices button on the

button bar , the Choose Invoices grid opens. You then click the

Prepayment radio button and click OK at the bottom of the form. (Remember, when entering an A/R

prepayment you cannot select an invoice or apply the prepayment to an invoice yet. Matching

prepayments and invoices must be done in a separate docuement created at

Accounting>Transactions>Enter A/R Credits. )

That returns you the the form where you are entering the prepayment. Click the Use Distribution Code

button on the button bar.

Select the special distribution code you have created previously just for use in AR prepayment

transactions.

As soon as you select the distribution code, ARPrepay above, you will see the GL: field populate with the

default AR Control GL Account that you setup in Administration or for the specific customer.

Clicking OK returns you to the A/R receipt entry form. You now click the click the Apply Offsets button

to complete the document with the special Offset Account Assignment you previously setup for this

purpose. . (Notice that the Progr, Dept, and 117 segments are empty because the distribution code that

was used did not have those segments in it; those are non-balancing segments and generally should not

be populated in entries to balance sheet accounts.)

Save the document and post the session as usual.

2. Entering A/R Invoices in the context of A/R Prepayments

A/R invoices can be entered at Accounting>Transactions>Enter A/R Invoices.

A/R invoices can also be created through the activities at Accounting>Activities>Manage A/R Billing.

Those processes are beyond the scope of this article.

Notice that you cannot “claim” a prepayment while entering or creating an invoice.

When entering an A/R prepayment generally the invoice to which it will be applied will be entered or

created later. But it is possible that the A/R invoice actually already exists; you may not have known at

the time of entering the prepayment that it really should have been applied to an existing A/R invoice.

Whether the prepayment is enter first or the A/R invoice is entered first is not important. The only thing

that matters as far as timing goes is that the two transactions must be entered in complete separate

sessions and as different transactions types.

3. In a third transaction, you will create a document in which you will match the prepayment

with one or more A/R invoices. In version 14.0 this is done only at

Accounting>Transactions>Enter A/R Credits (an ARM transaction).

Accounting>Transactions>Enter A/R Credits

Create the Session ID and click the Start button at the bottom of the form.

Populate the fields in the document header section a usual, but notice the Amount field should be zero.

All you are doing with this document is matching prepayments with invoices.

As soon as you tab away from the Customer ID field or when you click the Choose Invoices button on the

button bar , the Choose Invoices grid opens.

Select the prepayment you want to use and select the A/R invocie you want to apply the prepayment to.

Document Numbers 22222 (the prepayment) and 2400386 (a manual invoice) were selected.

But notice that the Amount to Apply for the prepayment is not the same as the invoice to which it is

being applied. The two could be the same or one could be higher than the other, but to continue you

will need to adjust the Amount to Apply for one of the lines so that the amounts are equal – remember

the Document Amount of the document is zero. So in this example the Amount to apply for the $250.00

prepayment will be manually changed to equal the invoice it is being applied to.

Yes, that would leave the prepayment with a balance,250.00 - 187.57 = 69.43.

Yes, you could apply the 69.43 to another invoice on the same selection grid so that the whole 250.00

was “used up” at this time.

When you are finished with your selection and adjusting the Amount to Apply fields, click OK to return

to the A/R Credit document.

Notice in the resulting transaction grid the debits now equal the credits, but the document is not “in

balance” by the Document Number field. There is only a debit to 22222, only a credit to 2400386, only a

credit to 400496..

You need to create additional lines in the transaction grid to balance the document by the Document

Number field. The easiest way to do that is to click the Apply Offsets button on the button bar to utilize

the Offset Account Assignments you previous setup at Maintain>Offset Account Assignments. This

create offsetting lines to the AR Prepayment Clearing account you have setup specifically for this

purpose. The entries to the AR Prepayment Clearing account in this example net to zero.

You can now save and post the ARM session as usual.