PROCURE TO PAYMENT(PTP) &

ACCOUNT PAYABLE(AP)

Interview Questions & Notes

2. Credit Sale vs. Debit Sale:

Credit Sale: A transaction where goods or services are sold, and payment is expected at a later date,
creating an accounts receivable entry.

Debit Sale: This term is less common, but it can refer to a sale recorded directly to cash or bank
accounts if payment is received immediately.

3. Credit Memo vs. Debit Memo:

Credit Memo: A document issued to reduce the amount a customer owes, often due to returns or
discounts.

Debit Memo: Issued to increase the amount owed, typically if there’s an undercharge or additional
service fees.

4. P2P (Procure-to-Pay) Cycle: This is the end-to-end process that starts with identifying the need for
goods or services, placing a purchase order, receiving the goods/services, and ends with payment to
the vendor. It includes steps like requisition, purchase order issuance, goods receipt, and invoice
processing.

5. Accounts Payable Cycle: A subset of the P2P cycle, focusing on processing invoices, validating
invoices against purchase orders, approvals, and final payment to suppliers. It ensures timely,
accurate payments and helps maintain good vendor relationships.

6. Depreciation: This is the allocation of the cost of a tangible asset over its useful life. It reflects the
asset’s declining value due to wear and tear or obsolescence. Depreciation expense is recorded
regularly to spread the cost over time.

7. Purchase Order (PO): A formal document issued by a buyer to a supplier detailing items,
quantities, prices, and agreed terms for a purchase. It acts as a legal contract once accepted by the
supplier.

8. 2-Way and 3-Way Match:

2-Way Match: Matching the purchase order with the invoice to verify price and quantity.

3-Way Match: Adds a third element by matching the purchase order, invoice, and goods receipt,
ensuring that the items received match the quantity and quality ordered and invoiced.

9. 4-Way Match: A less common, additional verification step in which quality inspection is also
matched, ensuring the received items meet quality specifications in addition to the price, quantity,
and receipt match.

10. Credit Purchase: When a company buys goods or services on credit, it agrees to pay the supplier
at a later date, resulting in an accounts payable entry for the buyer and accounts receivable for the
supplier.
Here’s a detailed list of journal entries commonly encountered in Procure-to-
Pay (P2P) and Accounts Payable (AP) processes:

1. Purchase of Goods/Services

(a) Without GST:

Purchases A/C Dr. XXX

To Vendor A/C XXX

(b) With GST:

- Intra-State (CGST & SGST):

Purchases A/C Dr. XXX

Input CGST A/C Dr. XXX

Input SGST A/C Dr. XXX

To Vendor A/C XXX

- Inter-State (IGST):

Purchases A/C Dr. XXX

Input IGST A/C Dr. XXX

To Vendor A/C XXX

2. Advance Payment to Vendor

(a) At the time of payment:

Advance to Vendor A/C Dr. XXX

To Bank A/C XXX

(b) Adjustment of Advance against Purchase Invoice:

Vendor A/C Dr. XXX

To Advance to Vendor A/C XXX

3. Goods Received but Invoice Not Yet Received (GR/IR Accounting)

- When goods are received but the vendor invoice is pending:

Purchases A/C Dr. XXX

To GR/IR Clearing A/C XXX

GR/IR Clearing A/C Dr. XXX

To Vendor A/C XXX

4. Payment to Vendor

(a) On payment of the invoice:

Vendor A/C Dr. XXX

To Bank A/C XXX

(b) With TDS Deduction:

Vendor A/C Dr. XXX

To Bank A/C XXX

To TDS Payable A/C XXX

5. Freight or Additional Expenses

- If freight or other expenses are paid separately:

Freight A/C Dr. XXX

To Bank/Cash A/C XXX

-If these are included in the purchase invoice:

Purchases A/C Dr. XXX

Input GST A/C Dr. XXX

To Vendor A/C XXX

6. Purchase Return

If goods are returned to the vendor:

- (a) Without GST:

Vendor A/C Dr. XXX

To Purchase Return A/C XXX

- (b) With GST:

Intra-State:

Vendor A/C Dr. XXX

To Purchase Return A/C XXX

To Input CGST A/C XXX

To Input SGST A/C XXX

Vendor A/C Dr. XXX

To Purchase Return A/C XXX

To Input IGST A/C XXX

7. Prepaid Expenses

-If payment is made in advance for services spanning multiple periods:

(a) At the time of payment:

Prepaid Expenses A/C Dr. XXX

To Bank A/C XXX

(b) At the time of expense recognition:

Expense A/C Dr. XXX

To Prepaid Expenses A/C XXX

8. Accrual for Expenses

- If an expense is incurred but the invoice is not received:

Expense A/C Dr. XXX

To Accrued Expenses A/C XXX

When the invoice is received:

Accrued Expenses A/C Dr. XXX

To Vendor A/C XXX

9. Reversal of Excess Provisions

If provisions for expenses are reversed:

Accrued Expenses A/C Dr. XXX

To Expense A/C XXX

10. Forex Transactions (Foreign Vendor Payment)

(a) At the time of invoice booking:

Purchases A/C Dr. XXX

To Vendor A/C XXX

- If there's a gain:

Vendor A/C Dr. XXX

To Bank A/C XXX

To Forex Gain A/C XXX

- If there's a loss:

Vendor A/C Dr. XXX

Forex Loss A/C Dr. XXX

To Bank A/C XXX

11. TDS (Tax Deducted at Source)

When TDS is deducted:

Vendor A/C Dr. XXX

To TDS Payable A/C XXX

To Bank A/C XXX

When TDS is deposited with the government:

TDS Payable A/C Dr. XXX

To Bank A/C XXX

1. What is Accounts Payable?

This refers to the money a company owes to suppliers or vendors for goods and services purchased
on credit. It's recorded as a liability on the balance sheet and managed within the P2P cycle.

2. How does AP differ from Accounts Receivable?

"Accounts Payable (AP) involves managing the company’s obligations to pay vendors for goods or
services, representing a liability. On the other hand Accounts Receivable (AR) focuses on tracking
and collecting payments owed by customers, representing an asset. AP handles outgoing payments,
while AR manages incoming cash flow."

3. What is the AP process?

"The Accounts Payable (AP) process involves managing a company’s obligations to vendors by
processing invoices, verifying accuracy, obtaining approvals, and ensuring timely payments. It
ensures smooth vendor relationships and accurate financial records."

4. What are the key components of an invoice?

"The key components of an invoice include the invoice number, invoice date, supplier and buyer
details, a description of goods or services provided, quantity and unit price, total amount, applicable
taxes like GST or VAT, payment terms, and the supplier’s bank details for payment. These elements
ensure the invoice is clear, accurate, and facilitates smooth payment processing."

5. How do you handle discrepancies in invoices?

To handle discrepancies in invoices, I follow a structured approach:

- I first compare the invoice details with the purchase order and delivery receipt to identify the
source of the discrepancy.

- If the issue is minor, like a clerical error, I clarify it with the vendor and request a corrected invoice.

- For larger issues, such as incorrect quantities or pricing, I escalate it to the appropriate team or
manager for resolution.

Throughout the process, I maintain clear communication with the vendor and internal stakeholders
to ensure the discrepancy is resolved promptly and payment is not delayed unnecessarily.

Or,

"To handle invoice discrepancies, I compare the invoice with the purchase order and delivery
receipt, identify the issue, and coordinate with the vendor or relevant team for resolution. I ensure
clear communication and timely corrections to avoid payment delays."
Invoice Processing

6. What is the procedure for processing invoices?

The procedure for processing invoices begins with receiving and reviewing the invoice for accuracy,
ensuring the vendor details, amounts, and dates are correct. Next, a three-way match is performed
by comparing the invoice with the corresponding purchase order and delivery receipt. Once the
details are confirmed, the invoice is sent to the relevant department or manager for approval. After
approval, payment is authorized and processed. Finally, the invoice is entered into the accounting
system and filed for record-keeping and future reference. This process ensures that invoices are
accurately reviewed, approved, and paid.

7. How do you verify invoice accuracy?

To verify invoice accuracy, I check that the vendor details, amounts, and dates match the purchase
order and delivery receipt. I also ensure the goods or services were received as agreed and that any
discounts or payment terms are applied correctly. If discrepancies arise, I consult with the relevant
departments (e.g., procurement or receiving) to resolve them before approving for payment.

8. What is the difference between a 2-way and 3-way match?

A 2-way match involves verifying the invoice against the purchase order to ensure the correct items,
quantities, and prices are listed. A 3-way match goes a step further by also including the goods
receipt, confirming that the items were actually received in the correct quantity and condition. The
3-way match provides an additional layer of verification, reducing the chances of discrepancies and
ensuring payments are made only for received goods or services.

9. How do you handle missing or lost invoices?

To handle missing or lost invoices, I first check our internal records, such as purchase orders or
receipts, to see if the transaction can be traced. If the invoice is still unavailable, I would request a
copy from the vendor through the help desk. I also coordinate with relevant departments to ensure
the transaction is recorded correctly. Once received, I verify the invoice details and process it
accordingly.

10. Can you explain the invoice approval process?

The invoice approval process involves receiving the invoice, matching it with the purchase order and
receipt, and sending it for department approval. Once approved, it’s authorized for payment and
recorded in the accounting system to ensure accuracy and compliance.