It keeps data on amounts owed by the business to its suppliers of goods and services. AR is an asset account and AP is a liability account. While the AR system produces bills to customers, the AP system produces checks to pay to suppliers. It also includes a detailed ledger for each supplier and an aged accounts report showing amounts owed by number of months elapsed since unpaid purchases. The payroll system exists to pay employees, to keep a ledger of payments to each employee, to withhold taxes and other amounts properly from employees pay and to post withheld amounts to the general ledger as liabilities to be paid to government entities and others on behalf of the employee.
Gross pay is made up of the net amount paid to each employee plus all withheld amounts.
Besides payroll ledgers for each employee, the payroll system usually also produces various payroll reports useful in satisfying liabilities for withholdings. If accounts receivable age without being collected or if inventory grows with large quantities sitting on shelves unsold the business will soon see profits dwindle or disappear. Maximum profits occur when the proper amounts are ordered at the proper times and prices are set properly to maximize profits. Either not having the item to sell or stocking too many unsold items will decrease profits. Inventory control is essential for businesses that sell large quantities of retail goods.