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PO Receipts, Receipt Adjustments and PO Invoices

Problem Details:

What entries are created with a PO Receipt and PO Invoice?

 

Solution:

When a Purchase Order is entered, there is no accounting entry created. 

When the receipt is posted, the first journal entry is recorded.  This entry is debit inventory, credit payables clearing.  The payables clearing account is specified in the account set of the item.  Check Inventory Control / Items & Price Lists / Items  to find out which account set the item is assigned to.  Then check Inventory Control / Setup / Account Sets to find out which account has been designated for the Payables Clearing account.  The Payables Clearing account should be a liability account, because this account acts as an accrued liabiltiy for the goods received, but not yet invoiced.  This entry will show up in the GL batch list as coming from the source ledger PO, and the entry will have a source code of PO-RC.

When the invoice is received, it can either be entered through the PO Receipts screen, or the PO Invoice screen. Both will give the same result.  If the PO Invoice is for the exact amount of the receipt, then the entry created will be debit payables clearing, credit accounts payables (after day end has been run and the invoice transferred to and posted in AP).  This invoice will show up in the GL batch list as coming from the source ledger AP, and the entry will have a source code of AP-IN. 

However, if the invoice is not for the same amount as the receipt - if the item costs are higher or lower than was recorded on the receipt - then a receipt adjustment (in addition to the invoice) will also be recorded for the difference between the old and new cost of the item.  This entry will be debit inventory, credit payables clearing (or credit inventory, debit payables clearing).  This receipt adjustment will show up in the GL batch list as coming from the source ledger PO , and the entry will have a source code of PO-IN.

In the example below, a receipt was entered for $100.  Then the invoice was entered for $90.  THe following entries are created in the General Ledger:

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