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newSchoolWorks.com › VoTechWorks › Business & Cross-Cutting › Bookkeeping / Office Administration › Accounts Receivable and Accounts Payable › Lesson 10
BUS-BOOK55-04 · Lesson 10 · 15 clock hours · lab

Integrated AR/AP Simulation: Full Monthly Cycle

Objective. Students independently complete a full month of AR and AP transactions for a simulated business, producing a final AR Aging Report, AP Aging Report, and reconciled trial balance with no more than two instructor-prompted corrections.

⚠ 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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Integrated AR/AP Simulation: Full Monthly Cycle

This lab is your capstone for the Accounts Receivable and Accounts Payable course. You will work independently through a complete month of business transactions for a simulated company, using the same tools, documents, and workflows a bookkeeper uses in practice every day. The goal is not just to enter numbers correctly—it is to close the month cleanly, produce four accurate reports, and communicate the financial position of the business in writing.

What the Full Monthly Cycle Looks Like

A bookkeeper's month has a clear rhythm. During the period, transactions arrive continuously: customer invoices go out, payments come in, vendor bills land in the inbox, and purchase orders are matched to receiving reports. At period-end, the rhythm shifts to verification and reporting. Every subsidiary ledger must agree with its control account, aging schedules must reflect true open balances, and any discrepancies must be resolved or documented before the trial balance is finalized.

For AR, the cycle runs: issue invoice → record customer payment → apply payment to invoice → resolve any disputes or returns → age outstanding balances. For AP, the cycle runs: receive vendor invoice → match to PO and receiving report (the three-way match) → record the bill → schedule payment → process remittance → reconcile vendor statements. When both cycles are complete and balanced, the trial balance proves that every dollar is accounted for.

Working Through the Source-Document Packet

Your 30-document packet includes sales orders, customer payments, vendor invoices, purchase orders, receiving reports, vendor remittances, one disputed invoice, and one returned item. These are the raw inputs of real bookkeeping; none of them enter the ledger automatically. You must evaluate each document before you post it.

For every sales order, verify that a corresponding invoice has been or needs to be created in QuickBooks. For every customer payment, confirm the check or remittance amount, then apply it to the correct open invoice—do not leave payments unapplied. For every vendor invoice, perform the three-way match: the invoice quantity and price must agree with the PO and the receiving report before you record the bill. If they do not agree, record what was actually received at the agreed price and flag the discrepancy in your memo.

The disputed invoice and the returned item require extra care. A disputed invoice should not be paid until the dispute is resolved; enter it as a bill but add a clear memo notation in QuickBooks and address it in your month-end memo. A returned item must reduce both the AP balance (through a vendor credit) and, if applicable, inventory or expense—depending on your chart of accounts.

Using the Period-End Checklist

The period-end checklist from Lesson 9 is your quality-control tool. Work through it in order. Key steps include: confirming all customer payments are posted and applied; confirming all vendor bills are entered and matched; running the AR Aging Summary and AP Aging Summary to review open balances; reconciling each subsidiary ledger total to its control account on the trial balance; and documenting any items that cannot be resolved within the period.

Do not skip the subsidiary-to-control reconciliation. In QuickBooks, the Accounts Receivable total on the Trial Balance must equal the sum of all open customer balances in the Customer Center. The Accounts Payable total must equal the sum of all unpaid bills in the Vendor Center. If these do not match exactly, you have a posting error, an unapplied payment, or a duplicate entry somewhere in the period.

Annotating Your Reports

After running the AR Aging Summary, AP Aging Summary, Unpaid Bills Detail, and Trial Balance, print or export each one and annotate it using the provided template. Annotations should confirm: the AR control account total equals the AR Aging Summary total; the AP control account total equals the AP Aging Summary total; and any accounts more than 30 days past due are identified by name and amount. Annotating reports is standard practice—it creates a reviewable audit trail for your controller or CPA.

Writing the Month-End Memo

Your one-page memo to the fictitious controller must cover four topics: (1) the current AR position, including total outstanding and any overdue accounts; (2) the current AP position, including total owed and upcoming due dates; (3) any unresolved vendor discrepancies, such as the disputed invoice or the return; and (4) cash-flow implications—specifically, what cash is expected to come in from customers and what cash must go out to vendors in the near term.

Use the business writing conventions from your program's Business Writing course: direct subject line, brief opening statement of purpose, numbered or bulleted body sections, and a professional closing. Accuracy matters as much here as in the ledger—dollar amounts in the memo must match your printed reports exactly.

Accuracy and Data Integrity

The pass standard for this lab is strict: the AR and AP totals on the Trial Balance must agree with their respective subsidiary ledgers within $0, and you may require no more than two instructor-prompted corrections after your initial submission. This reflects real-world expectations. A bookkeeper who regularly submits unbalanced reports creates extra work for supervisors and auditors and risks errors in financial statements.

Workplace Safety Note

Bookkeeping work involves prolonged computer use. Adjust your chair, monitor height, and keyboard position to maintain a neutral posture. Take short breaks to reduce eye strain and repetitive-stress risk. Keep your workspace organized so that physical source documents are handled carefully and not lost or damaged—lost source documents create audit problems that are difficult to correct after the period is closed.

Key terms8

Three-Way MatchThe process of comparing a vendor invoice against the original purchase order and the receiving report to verify that quantity, description, and price all agree before a bill is recorded or paid.
AR Aging SummaryA QuickBooks report that groups outstanding customer balances by how long they have been unpaid (current, 1–30 days, 31–60 days, etc.), used to monitor collection risk.
AP Aging SummaryA QuickBooks report that groups unpaid vendor bills by how long they have been outstanding, used to prioritize payments and avoid late fees.
Subsidiary LedgerA detailed record of individual customer or vendor balances that supports and must agree in total with the corresponding control account in the general ledger.
Control AccountA general-ledger account (Accounts Receivable or Accounts Payable) whose balance equals the sum of all individual balances in the related subsidiary ledger.
Vendor CreditA QuickBooks transaction that reduces the amount owed to a vendor, used when goods are returned or when a vendor issues a credit memo for a billing error.
Period-End ChecklistA documented sequence of steps a bookkeeper follows at the close of an accounting period to ensure all transactions are posted, ledgers are reconciled, and reports are accurate before closing the books.
Unapplied PaymentA customer payment that has been recorded in QuickBooks but not matched to a specific invoice, causing the AR balance to appear incorrect until the payment is applied.

Worked examples3

1. After entering all transactions, the AR control account on the Trial Balance shows $14,250.00, but the AR Aging Summary total shows $13,975.00. What is the dollar difference, and what is the most likely cause?
  1. Subtract the smaller figure from the larger: $14,250.00 − $13,975.00 = $275.00 discrepancy.
  2. A $275.00 difference between the control account and the aging summary most commonly results from a payment that was deposited and recorded in the bank register but never applied to the customer's open invoice—leaving the invoice still showing as open in the aging report while the control account was reduced by the deposit.
  3. Open the Customer Center, filter for the customer with the $275.00 open balance, and check whether a payment exists that is marked 'Unapplied.' If so, open the payment and apply it to the correct invoice.
  4. Re-run the Trial Balance and AR Aging Summary to confirm both now show $13,975.00, or whatever the correct open balance is after the application.
Answer: The discrepancy is $275.00, most likely caused by an unapplied customer payment. Applying the payment to the correct invoice resolves the difference and brings both totals into agreement.
2. A vendor invoice for $1,800.00 covers 60 units at $30.00 each. The PO authorized 60 units at $30.00, but the receiving report shows only 55 units were delivered. What amount should be recorded as the bill, and what amount remains in dispute?
  1. Calculate the amount for goods actually received: 55 units × $30.00 = $1,650.00.
  2. Calculate the amount in dispute (not received): 60 − 55 = 5 units × $30.00 = $150.00.
  3. Record the bill in QuickBooks for $1,650.00, the amount supported by the receiving report and the PO unit price.
  4. Add a memo in the bill record noting that 5 units ($150.00) are disputed pending delivery or vendor credit, and document this discrepancy in the month-end memo to the controller.
Answer: Record the bill for $1,650.00. The remaining $150.00 is disputed and should not be recorded as a liability until the shortfall is resolved by delivery or a vendor credit memo.
3. At month-end, total open customer invoices are $22,400.00 and total unpaid vendor bills are $9,800.00. Cash on hand is $6,500.00. If all customers in the current aging bucket ($14,000.00) pay within 10 days and you must pay two vendors totaling $4,200.00 within 10 days, what is the projected cash balance after those transactions?
  1. Start with current cash: $6,500.00.
  2. Add expected customer collections (current bucket): $6,500.00 + $14,000.00 = $20,500.00.
  3. Subtract vendor payments due within 10 days: $20,500.00 − $4,200.00 = $16,300.00.
  4. The projected cash balance is $16,300.00, assuming all current-bucket customers pay on time and no other cash activity occurs.
Answer: Projected cash balance: $16,300.00. This figure should be reported in the cash-flow section of the month-end memo so the controller can plan for any additional obligations.
In class: Students receive a packet of 30 source documents (sales orders, customer payments, vendor invoices, POs, receiving reports, vendor remittances, one disputed invoice, one returned item) and enter all transactions in QuickBooks without instructor guidance, following the period-end checklist from Lesson 9 · Students run and print the AR Aging Summary, AP Aging Summary, Unpaid Bills Detail, and Trial Balance from QuickBooks, annotating each report to confirm subsidiary-to-control-account agreement · Students write a one-page month-end summary memo addressed to a fictitious controller, explaining the AR/AP position, any overdue accounts, any unresolved vendor discrepancies, and cash-flow implications—integrating professional communication skills from the program's Business Writing course
Materials: QuickBooks lab file (clean starting point), 30-document source-document packet, period-end checklist, report annotation template, business writing style guide
Check: All four QuickBooks reports and the month-end memo submitted; pass = Trial Balance AR and AP totals agree with subsidiary ledgers within $0, no more than two corrections needed after initial submission, memo addresses all four required topics

Practice check8

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

QuickBooks Certified User: Accounts Receivable
1. After running the Trial Balance, a bookkeeper notices the Accounts Receivable control account total is $500 higher than the AR Aging Summary total. What is the most likely cause?
AIPB Certified Bookkeeper: Internal Controls and Payables
2. Which three documents are compared in a three-way match before a vendor bill is approved for payment?
AIPB Certified Bookkeeper: Accounts Payable
3. A vendor delivers 40 units of a product; the PO authorized 40 units at $25.00 each. The vendor's invoice bills for 45 units at $25.00. What amount should the bookkeeper record as the accounts payable bill?
QuickBooks Certified User: Accounts Payable
4. In QuickBooks, which report would a bookkeeper run to see a breakdown of all unpaid vendor bills grouped by how many days past due they are?
QuickBooks Certified User: Accounts Payable
5. A bookkeeper records a return of defective merchandise to a vendor. Which QuickBooks transaction correctly reduces the amount owed to that vendor?
AIPB Certified Bookkeeper: Professional Communication
6. The month-end memo to the controller must address four specific topics. Which of the following is NOT one of the required topics for this lab's memo?
AIPB Certified Bookkeeper: Accounts Receivable
7. After annotating her reports, a student finds that the AR control account on the Trial Balance equals $31,600 and the AR Aging Summary total equals $31,600. What does this confirm?
Microsoft Office Specialist: Word / Professional Communication
8. When formatting a professional month-end memo in Microsoft Word, which structural element best helps the controller quickly locate each of the four required topics?
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