Post-dated checks are a widely and commonly used business practice. Post dated checks are checks which are delivered now with a date in the future, so that it cannot be cashed until that date. Microsoft Dynamics AX 2012 introduced the PDC functionality in both AR and AP modules which is fully integrated with check printing, banking and payment settlements functionality.
A lot of people are certainly aware about the creation of post dated checks, however most of them get confused over the accounting entries generated in AX 2012. Well, today, we shall be focusing on the accounting entries generated whilst creation of a Vendor Post Dated Check in Microsoft Dynamics AX 2012. We shall be observe the entries in a two-step process:
- Accounting entries created at the time of posting of the post dated checks.
- Accounting entries generated when the check finally matures and is settled in AX 2012.
In this post, we shall strictly be focusing on the accounting entries generated whilst the processing of the post dated checks in Dynamics AX 2012. If you happen to require assistance in setting up and processing post dated checks, there is a nice post here on The Dynamics Blog by Manisha Shahani on Post Dated Checks in Dynamics AX 2012 (link provided below).
1. Accounting entries created at the time of posting of the post dated checks.
The first set of accounting entries are generated at the time of posting of a vendor payment via a post dated check. Although, I earlier stated that I shall not be covering the setups here in this blog, however, it was relevant to show the Postdated Check setup in Cash and Bank Management Module for a clearer understanding
As shown in the screenshot below, I created an account (04-04-23 – Post Dated Check Clearing Account) for clearing entries to be posted against a vendor postdated check. Keep this account in mind as this would be our key bridging account in both set of entries created.
Moving on, I create a Payment Journal to pay PKR 40.00 to a vendor via a post dated check. We create a line, select the vendor, enter the amount (or use the settlement form to select invoices to settle), select our method of payment for post dated check and finally generate a post dated check. As you can see in our post, the account selected is our Vendor, whilst the offset account is the Post Dated Check Clearing Account. If you remember, it is the same account I selected in the Cash and Bank Parameters.
In our case, we have generated check number 3 as our post dated check. The check creation date is our posting date, i.e. July 9, 2014 whilst I have selected the maturity date of the check as July 21, 2014. Thus concluding that the check will mature on July 21, 2014.
Once the journal is posted, the following entries are created with respect to the post dated check:
Vendor liability – Debit – PKR 40.00
Post dated check clearing account – Credit – PKR 40.00
As you can observe, the vendor liability is settled at the time posting of the post dated check, and thus, AX settles the liability at the time of posting rather than at the time of maturity of the check i.e. July 9, 2014.
2. Accounting entries generated when the check finally matures and is settled in AX 2012.
Users can view and track all the Vendor Post dated checks in the AP > Common > Post Dated Checks form. When the check maturity date reaches, you can click Settle clearing entries button, and system automatically posts the general journal for this clearing entry. Screenshot below.
Once the check has been settled, the amount is credited from the respective bank account and the post dated check clearing account is debited with the payment amount. The entry is illustrated below:
Post dated check clearing account – Debit – PKR 40.00
Bank Account – Credit – PKR 40.00
To conclude, the following accounting treatments occurs whilst making a payment via post dated checks:
- At the time of posting of the payment, the vendor liability is extinguished, however the bank account is not yet credit, instead a clearing account is used for the purpose.
- At the time of settlement of the check, the bank is finally credited against the clearing account used earlier.