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BUS-BOOK55-02 · Lesson 4 · 12 clock hours · lab

Vendor Center: Bills, Purchase Orders, and Paying Bills

Objective. Students will set up vendors, record bills and purchase orders, apply vendor credits, and process bill payments, producing an A/P Aging Summary that matches a provided scenario balance.

⚠ Pending professional review

This lesson, its worked examples and its practice questions has not yet been verified by a credentialed professional in the field or by a certification or approval body. It is a study draft and may contain errors. Do not use it as instructions for work on a job site or on live equipment. Always follow your instructor, your supervising professional, and current official references and regulations.

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Vendor Center: Bills, Purchase Orders, and Paying Bills

Why Accounts Payable Management Matters

Every business buys goods and services on credit. Accounts Payable (A/P) is the record of what your company owes vendors and when those amounts are due. Accurate A/P management protects cash flow, preserves vendor relationships, and keeps your books free of errors that can trigger costly audits or late fees. In QuickBooks Online (QBO), the Vendor Center is your home base for all purchasing activity.

Setting Up Vendor Records

Before you can record a single bill, you need a complete vendor record. Navigate to Expenses → Vendors → New Vendor. Enter the vendor's legal name, company name, billing address, payment terms (for example, Net 30), tax ID if applicable, and the default expense or inventory account. Accurate terms are critical: QBO uses them to calculate due dates on every bill you enter for that vendor. Always double-check the mailing address and banking details; a wrong ACH routing number or a mistyped address will delay payment and may harm your credit standing with the supplier.

Purchase Orders

A Purchase Order (PO) is a non-posting document — it does not affect your general ledger balance when you create it. It is a formal promise to buy goods or services at an agreed price. In QBO, go to + New → Purchase Order. Select the vendor, enter line items with quantities and unit costs, and save. The PO appears in the vendor's transaction list with an Open status.

When the items arrive, open the PO and click Receive Items (or link to a bill). QBO creates a bill or item receipt that does post to the ledger, debiting the inventory asset account (for stocked goods) or the appropriate expense account (for supplies or services), and crediting Accounts Payable. Verify the debit side carefully: receiving inventory to an expense account, or vice versa, is one of the most common A/P errors.

Entering Bills Directly

Not every purchase involves a PO. For recurring utilities, subscriptions, or unexpected invoices, enter a bill directly: + New → Bill. Choose the vendor, enter the bill date, due date, and account or item details. The transaction debits the expense or asset account and credits Accounts Payable — the same effect as receiving against a PO.

Vendor Credits and Applying Them

A vendor credit memo reduces what you owe. Common reasons include returned merchandise, pricing adjustments, or duplicate billing. Enter it at + New → Vendor Credit. Select the vendor, choose the same account or item originally charged, and enter the amount. The credit debits Accounts Payable and credits the expense or inventory account, reversing the original entry.

A vendor credit does not automatically reduce your next payment. You must apply it. When you are ready to pay, open Pay Bills, locate the open bill, and check the Credits column to apply any available credit to that bill before finalizing payment. Forgetting this step leaves an unapplied credit sitting in A/P and overstates what you owe.

Paying Bills

Go to Expenses → Vendors → Pay Bills. Select the payment date, payment account (checking or savings), and payment method:

Check the box beside each bill you want to pay, apply any credits, confirm the payment amount, and click Save. QBO debits Accounts Payable and credits the bank account. The bill status changes to Paid.

A/P Aging Summary

After recording all transactions, run the A/P Aging Summary report: Reports → A/P Aging Summary. This report groups unpaid bills by how long they have been outstanding — Current, 1–30 days past due, 31–60 days, 61–90 days, and over 90 days. The grand total represents your total outstanding A/P balance.

Compare this total to your scenario answer sheet. Discrepancies usually trace to a bill entered with the wrong date, a credit that was not applied, a PO receipt posted to the wrong account, or a duplicate bill entry.

Data Integrity and Security

Though bookkeeping does not involve physical hazards like machinery, data security is the equivalent of workplace safety in this field. Always:

These habits protect your employer, your clients, and your own professional reputation.

Key terms8

Accounts Payable (A/P)A current liability account representing amounts owed by the business to vendors for goods or services received but not yet paid.
Purchase Order (PO)A non-posting document in QuickBooks Online that records a formal agreement to purchase specific items from a vendor at an agreed price; it does not affect the general ledger until items are received.
Vendor CreditA transaction that reduces the amount owed to a vendor, entered in QuickBooks Online to record returned goods, pricing adjustments, or overbilling; it must be manually applied to an open bill.
BillA posting transaction in QuickBooks Online that records a vendor invoice, debiting an expense or asset account and crediting Accounts Payable.
A/P Aging SummaryA QuickBooks Online report that lists all unpaid vendor bills grouped by the number of days they are past due, showing the total outstanding Accounts Payable balance.
ACH (Automated Clearing House)An electronic funds transfer network used to pay vendors directly from a bank account without printing a paper check.
Item ReceiptA QuickBooks Online transaction that records the physical arrival of goods ordered on a purchase order before the vendor invoice is received, posting the debit to inventory or expense.
Payment TermsThe agreed conditions that specify when a vendor invoice is due, such as Net 30 (full payment due 30 days after the invoice date), used by QuickBooks Online to calculate due dates automatically.

Worked examples4

1. You received a bill from Office Supply Co. for $240.00 of printer paper (expense account: Office Supplies). A vendor credit memo for a returned ream totaling $18.00 was also received. What is the net amount owed to Office Supply Co. after applying the credit?
  1. Step 1 — Record the bill: Debit Office Supplies $240.00; Credit Accounts Payable $240.00. Open bill balance = $240.00.
  2. Step 2 — Record the vendor credit: Debit Accounts Payable $18.00; Credit Office Supplies $18.00. Unapplied credit = $18.00.
  3. Step 3 — Apply the credit in Pay Bills: Net payment due = $240.00 − $18.00 = $222.00.
  4. Step 4 — Record payment of $222.00: Debit Accounts Payable $222.00; Credit Checking Account $222.00. Remaining A/P balance for this vendor = $0.00.
Answer: Net amount owed after applying the credit: $222.00
2. You created a Purchase Order for 10 units of a product at $45.00 each. When inventory was received, only 8 units arrived. What dollar amount posts to the Inventory Asset account at the time of receipt, and what is the open PO balance?
  1. Step 1 — Calculate value of units received: 8 units × $45.00 = $360.00.
  2. Step 2 — Record item receipt: Debit Inventory Asset $360.00; Credit Accounts Payable $360.00.
  3. Step 3 — Calculate remaining PO balance: Total PO = 10 × $45.00 = $450.00. Amount received = $360.00. Open PO balance = $450.00 − $360.00 = $90.00.
  4. Step 4 — The PO remains Open in QBO for the remaining 2 units ($90.00) until the backorder is received or the PO is closed manually.
Answer: Inventory Asset debited: $360.00; Open PO balance: $90.00
3. Three bills are unpaid: Vendor A $500.00 (15 days past due), Vendor B $1,200.00 (45 days past due), Vendor C $300.00 (current). What will the A/P Aging Summary show in the Current, 1–30, and 31–60 day columns, and what is the grand total?
  1. Step 1 — Assign Vendor C ($300.00) to the Current column (not yet due).
  2. Step 2 — Assign Vendor A ($500.00) to the 1–30 days past due column (15 days past due falls in that range).
  3. Step 3 — Assign Vendor B ($1,200.00) to the 31–60 days past due column (45 days past due falls in that range).
  4. Step 4 — Sum all columns: $300.00 + $500.00 + $1,200.00 = $2,000.00 grand total.
Answer: Current: $300.00 | 1–30 days: $500.00 | 31–60 days: $1,200.00 | Grand Total: $2,000.00
4. You pay two bills in one Pay Bills session: $750.00 to Vendor X and $425.00 to Vendor Y, both by check from the business checking account. What is the total debit to Accounts Payable and the total credit to the Checking account for this session?
  1. Step 1 — Payment to Vendor X: Debit A/P $750.00; Credit Checking $750.00.
  2. Step 2 — Payment to Vendor Y: Debit A/P $425.00; Credit Checking $425.00.
  3. Step 3 — Total debit to Accounts Payable: $750.00 + $425.00 = $1,175.00.
  4. Step 4 — Total credit to Checking Account: $750.00 + $425.00 = $1,175.00.
Answer: Total Debit to A/P: $1,175.00; Total Credit to Checking: $1,175.00
In class: Enter four vendor records; create two purchase orders, receive items against each PO, and verify that inventory or expense accounts are debited correctly. · Enter three bills directly (no PO), enter one vendor credit memo, and apply the credit against an open bill. · Schedule and record bill payments by check and by ACH; generate A/P Aging Summary and reconcile the ending balance to the scenario answer sheet.
Materials: QBO trial account, vendor data packet, purchase order scenario handout, QuickBooks Certified User Study Guide (A/P chapter)
Check: A/P Aging Summary total matches scenario answer within $1.00; all vendor credits applied; pass = 90% task completion verified by instructor checklist.

Practice check8

Answer each question, then check it. Nothing is recorded; this is your own practice.

QuickBooks Certified User — A/P and purchasing workflow
1. In QuickBooks Online, what effect does saving a Purchase Order have on the general ledger?
QuickBooks Certified User — A/P and inventory
2. When you receive inventory items against a Purchase Order in QuickBooks Online, which accounts are affected?
QuickBooks Certified User — Vendor credits
3. A vendor credit memo is entered in QuickBooks Online. If the bookkeeper takes no further action, what happens to the credit?
QuickBooks Certified User — Reports
4. Which QuickBooks Online report shows unpaid vendor bills grouped by how long they have been outstanding?
QuickBooks Certified User — Vendor setup
5. You are setting up a new vendor in QuickBooks Online. Which piece of information directly controls the due date that QBO calculates for every bill you enter for that vendor?
AIPB Certified Bookkeeper — Debits and credits / A/P
6. After paying a vendor bill by check in QuickBooks Online, which journal entry correctly reflects the payment?
Microsoft Office Specialist / Office Administration — Data security
7. From a data security standpoint, what is the safest practice when adding ACH banking information for a new vendor in QuickBooks Online?
QuickBooks Certified User — Troubleshooting A/P
8. An A/P Aging Summary shows a grand total of $3,500.00, but the scenario answer sheet shows $3,275.00. Which of the following is the MOST likely cause of the $225.00 discrepancy?
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