06-15-2011, 12:59 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by surfol</i>
<br />Hello guys,
I'm trying to understand a procedure for purchasing and the journalizing associated with it. Below is what I assume happen, but I'm not sure, so correct me if I'm wrong
1. Purchasing Department approves a PO for 10 widgets, of which a copy is passed each to the accounting and receiving department.
2. Receiving department receives the widgets from the supplier with a packing list that list the quantity only (no invoice has been sent yet). He or she cross match with PO to make sure the quantity match and then enter the data into the invetory system
*** not sure what happens to the accounting side at this point. Are AP and inventory updated in the journals at this point? if they are, what price do we use since invoice has not been sent yet ***
3. Receiving Dept. forward the packing list to the accounting department.
4. Accounting Dept. receives invoice for the 10 widgets from the supplier. He or she then cross match the qty with the packing list and croos match the price with the purchase order
5. Acct Dep. produces a Purchase Invoice > AP & Inventory are updated
*** again, I'm not sure if AP & Inventory should be updated at this point or at no.2
As you can see, I'm not sure if the AP & Inventory amount should be updated when you receive the packing list, or when you receive the Invoice?
So, if anyone can explain to me, that'd be great =)
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Hi,
My reply would specifically be in context of Oracle system, but would be logical and can be applied to any system in use after changing terminologies
When goods are received, the user department (UD) has to enter reciept of quantity in system. The system should, after doing 2 way matching (of quantity of PO and PR), update the records and do accounting by picking rate of goods from PO multiplying by actual quantity of goods entered/received in the system. This is automatically generated accrual and is called accrued liability for goods received but not invoiced. This is also called perpetual accrual system. When invoice is received by accounting department, the system before accepting the booking of invoice should perform 3 way matching (of receipt, PO and invoice). After 3 way matching is performed, invoice is booked and accrued liability (earlier booked at time of reciept) is transferred to invoiced payable. Payment is then made as per business routine.
So the answer to your question is, accounting is done when goods are received and not when invoice is received following accrual concept. If the system functionality doesnt allow to use 'perpetual accrual system', manual accruals should be taken as at reporting period to ensure completeness of accruals and accounting for goods received but not invoiced.
Comments from other members having exposure to different systems would be welcomed.
<br />Hello guys,
I'm trying to understand a procedure for purchasing and the journalizing associated with it. Below is what I assume happen, but I'm not sure, so correct me if I'm wrong
1. Purchasing Department approves a PO for 10 widgets, of which a copy is passed each to the accounting and receiving department.
2. Receiving department receives the widgets from the supplier with a packing list that list the quantity only (no invoice has been sent yet). He or she cross match with PO to make sure the quantity match and then enter the data into the invetory system
*** not sure what happens to the accounting side at this point. Are AP and inventory updated in the journals at this point? if they are, what price do we use since invoice has not been sent yet ***
3. Receiving Dept. forward the packing list to the accounting department.
4. Accounting Dept. receives invoice for the 10 widgets from the supplier. He or she then cross match the qty with the packing list and croos match the price with the purchase order
5. Acct Dep. produces a Purchase Invoice > AP & Inventory are updated
*** again, I'm not sure if AP & Inventory should be updated at this point or at no.2
As you can see, I'm not sure if the AP & Inventory amount should be updated when you receive the packing list, or when you receive the Invoice?
So, if anyone can explain to me, that'd be great =)
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Hi,
My reply would specifically be in context of Oracle system, but would be logical and can be applied to any system in use after changing terminologies
When goods are received, the user department (UD) has to enter reciept of quantity in system. The system should, after doing 2 way matching (of quantity of PO and PR), update the records and do accounting by picking rate of goods from PO multiplying by actual quantity of goods entered/received in the system. This is automatically generated accrual and is called accrued liability for goods received but not invoiced. This is also called perpetual accrual system. When invoice is received by accounting department, the system before accepting the booking of invoice should perform 3 way matching (of receipt, PO and invoice). After 3 way matching is performed, invoice is booked and accrued liability (earlier booked at time of reciept) is transferred to invoiced payable. Payment is then made as per business routine.
So the answer to your question is, accounting is done when goods are received and not when invoice is received following accrual concept. If the system functionality doesnt allow to use 'perpetual accrual system', manual accruals should be taken as at reporting period to ensure completeness of accruals and accounting for goods received but not invoiced.
Comments from other members having exposure to different systems would be welcomed.
