In the last post we discussed Dispute Management and shared a workflow for payment administration
Once a purchase return has been agreed to, it leads to the process of accounting for the same.
Accounting for purchase returns
Fundamentally, this process will comprise of ensuring all approvals, sign-offs are in place before an actual entry is made. Some clients, make this entry right upfront. So the entry for this shall be:
Vendor Account Dr. xxxxxxxx
To Purchase Returns XXXXXXXX
A corresponding entry will be done for the material in the inventory accounting module.
As I mentioned, the key to this is ensuring all approvals are in place and accounted for.
Oh well, when we have done all of this, we need to report some of this to the legal authorities as well.
In terms of compliance reporting, different countries will have different requirements. One of the key compliance reporting that I have seen as an outsourcer is the 1099 reporting.
What exactly is the 1099? Just like in India, we deduct TDS (Tax deducted at source) and provide the return to the income tax authorities, in the US, though no tax is deducted at source, an information of all amounts paid to various vendors needs to be filed with the IRS.
Normally, the clients prefer retaining various compliance reporting as an in-house and closely guarded function. What I have covered is primarily on account of AP processes only.
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