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Updated on 3/14/2019
Help by Modules latest
Accounting Purchase Transactions
Direct link to topic in this publication:

Accounting Transactions from Purchase Module.


A Purchase transaction can be completed by any of the following steps


  1. Purchase Quotation > Purchase Order > Purchase Invoices 
  2. Purchase Quotation > Purchase Order > Goods Receipts > Purchase Invoices


Based of different companies internal policies, they can either convert a Purchase Order directly to a Purchase Invoice or they can convert Purchase Order first to a Goods Receipt where they will ensure the goods received are of appropriate type and finally will convert Goods Receipt to Purchase Invoice.


I) Purchase Quotation > Purchase Order > Purchase Invoices


Scenario:


A) A Purchase Order has been placed for 50 units where 25units have been confirmed


B) Convert the same Purchase Order to Purchase Invoice


C) In Purchase Invoice transaction, it has been invoiced for entire 50 units though the actual received are 20 units which is again lesser than confirmed.


D) Cash has been paid after the Invoice is saved. (We can also do a payment directly after saving a PO)


a) Purchase Invoice: converted PO to PI and saved as per above scenario


Accrued purchases dr xxx


stock dr xxx


To Accounts payable xxx


Accounting entry interpretation


Debit


Accrued purchases: Refers the outstanding units to be received


Stock: Refers the total quantity received


Credit


Accounts payable : Indicates the creditors list towards whom the company owes the money for the Goods purchased. It will be the total of Accrued purchases and Stock.


(If tax is charged on purchases, the same amount will be debited by adding to stock and on the credit side


A/c payable will show an amount inclusive of tax .)


b) Purchase Invoice : cash paid


When cash is paid against a Purchase Invoice, following accounting entry is made under Receipt Journal.


Payment on Purchase Invoice dr xxx


To Payment by Cash xxx


Accounting entry interpretation


Debit


Payment on Purchase Invoice : Indicates the expense paid off by the company. It also denotes the deduction in liability on accounts payable.


Credit


Payment by Cash: Refers the amount dispensed from company against Purchase Invoice.


c) Purchase Invoice : Partial amount paid


If the amount paid is partial, the same is shown under history tab of PI transaction. Amount paid against Invoice will be shown under Payment Journal.


II) Purchase Quotation > Purchase Order > Goods Receipts > Purchase Invoices


Scenario:


A) A Purchase Order has been placed for 40 units were 20 has been confirmed


B) The Purchase Order has been converted to a Goods Receipts and received 15 units


C) There after converting Goods Receipts to Purchase Invoice,


D) In Purchase Invoice transaction, entire 40 units have been invoiced though the actual received are 15 units which is again lesser than confirmed.


E) Cash payment after the Invoice got saved.


a) Goods Receipt: Converted PO to GR and saved as per above scenario


When Goods are received under Goods Receipt level


Stock dr xxx


To Accrued purchases xxx


Accounting entry interpretation


Debit


Stock : Indicates the total unit of stock received by the company.


Credit


Accrued purchases: refers the amount owing towards the supplier. It also indicates the units of stock


(If tax is charged on purchases, the same amount will be debited by adding to stock and on the credit side


A/c payable will show an amount inclusive of tax .)


b) Purchase Invoice : Converted a GR to PI and saved as per above scenario


When Goods are invoiced under Purchase Invoice level


Accrued purchases dr xxx


stock dr xxx


To Accounts payable xxx


Accounting entry interpretation


Debit


Accrued purchases: Refers the outstanding units to be received


Stock: Refers the total quantity received


Credit


Accounts payable : Indicates the creditors list towards to whom the company is owes the money for the Goods purchased. It will be sum total of Accrued purchases and Stock.


(If tax is charged on purchases, the same amount will be debited by adding to stock and on the credit side


A/c payable will show an amount inclusive of tax .)


c) Purchase Invoice : cash paid 


d) Purchase Invoice : Partial amount paid are similar to first case.


e) Purchase Invoice : combo entry


Accounting entry for a Purchase invoice having both discount and Tax adjustments.


Stock account dr xxx


To accounts payable xxx


Accounting entry interpretation


Debit


Stock account: shows the quantity that has been received


Credit


Accounts payable: Indicates the amount liable toward the suppliers.


Calculation of A/c Receivable


a) [(purchase cost per unit * number of units) – Discount %] gives purchase cost after discount.


b) ( purchase cost after discount + Tax rate) gives net A/c's payable.