Improving financial reporting clarity by splitting purchasing accounts

By default, in Dynamics GP, when a payables invoice is fully or partially paid, the payment portion of the transaction doesn't flow through the payables account. This can make it more difficult to trace a transaction as the transaction could skip the payables account altogether by crediting cash and debiting an expense.

GP provides an optional setting to force transactions to flow through the payables account and that's what we'll look at in this recipe.

How to do it...

Setting up GP to pass voucher payments through payables is as easy as following these steps:

1. Select the Administration button from the Navigation Pane on the left. In the Administration Area Page click on Company under the Setup and Company headers.
2. Click on the Options button. In the Company Setup Options window scroll down to the setting marked Separate Payment Distributions and select the checkbox next to it:
   
3. Click on OK to close the window and accept the changes.

How it works...

Let's assume a $100 purchase transaction where $20 is paid in cash and the remaining $80 would go to accounts payable. By default, GP will create a transaction distribution that looks similar to the following screenshot:

After the Separate Payment Distributions checkbox is selected, GP will create a transaction that looks similar to the following screenshot:

Notice that the full $100 is credited to payables and then the $20 payment is debited to reduce accounts payable to the amount due.