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24 - Part 7 – Accounting
Finance Charges
Quantrac 2005 Accounts Receivable module includes the ability to create, track, pay, or delete finance charges for
invoices past due. The Accounts Receivable Setup includes setting up defaults and parameters for creating finance
charges. (See previous sections)
In accordance with Generally Accepted Accounting Principles, finance charges are considered Revenue when
created…and will be posted to the appropriate Revenue GL account.
Finance charges created in December, for instance, will be reported in December, irregardless of the month for
which the charges were accrued. (i.e., Creation of finance charges on December 1, 1997 for the month of
November will be reported in December’s AR Summary and Detail reports)
Quantrac 2005 creates finance charges monthly. The program will allow the creation of Finance Charges at any
time during the month, but will warn the operator if they are created before the 25th of the month, since the charges
will be computed for the entire month. (i.e., creating finance charges on November 26th
will create finance charges
for the 30 days of November)
In the Finance Charge setup, you have entered the date on which finance charges can begin. The system interprets
that date as the first month for which to accrue the charges. The first time finance charges are created will be for
that entire month. Any invoices, which meet the criteria, will cause a finance charge to be created based on the
following formula:
1.
Last day of the month, minus (Invoice Date + Terms + Grace Period) = number of days to compute charges
2.
Number of days x (Annual Percentage Rate / 365) = monthly finance charge amount
3.
If the accumulation of finance charges for a given customer (on one or many invoices) is greater than the
minimum finance charge, finance charges will be created.
Finance charges will then be created for successive months, based upon the number of days in the month. (i.e.,
November = 30 days, December = 31 days)
Finance charges can be viewed before creation. You have the ability to omit finance charge creation at will before
actually creating them. For instance, a previous arrangement with a customer may exclude finance charges for that
customer.
If a customer pays an invoice and the total associated finance charges accrued, you can apply the payment to the
invoice and the finance charge balance for that invoice.
If a customer pays the invoice, but refuses to pay the finance charges, you may write-off the finance charges to an
expense account (usually an Uncollectable or Bad Debt GL account). Finance Charge revenue will be decreased by
the amount of the write-off.
Finally, if a customer never pays an invoice or the accrued finance charges, you can write-off the entire transaction,
moving the amounts due from revenue accounts to Bad Debt accounts.
The following pages and graphics illustrate the finance charge scenario.
Generating Finance Charges:
Note: This procedure assumes that you have correctly completed the Finance Charge Setup, and that you have
customers who have invoices that meet the criteria.
1.
On the Menu Bar, click Accounting|Generate Finance Charges.
2.
The system will confirm your intentions to create finance charges for the month indicated.
3.
Click Yes
4.
The following form will appear:
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