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Accounts Payable Journal Entries

March 17, 2013

PURCHASE RELATED ACTIVITIES

Accounting entries get generated at the time of GR/IR, and invoice verification.

At the time of GR/IR, the following entry gets generated.

Inventory a/c………….…………..Dr. xxx

To GR/IR a/c……………………………..xxx

On doing the Invoice verification, the following entry gets generated and the liability is booked.

GR/IR a/c…………………………..Dr. xxx

To Vendor a/c……………………………xxx

At the time of invoice verification if there are differences between GR value and IR and if stock is not available the difference amount would go to price differences A/c.

1) PURCHASE – RAW MATERIAL

At the time of Goods Receipt the following entry gets generated   (Ex. with notional figures).

For a P.O of Rs. 100(Basic 70 + Freight 10 ) (when freight is borne by the company)

Inventory (Raw-material) a/c………………….Dr 80

To GR/IR Clearing a/c……………………………….70

To Freight clearing a/c………………………………10

On doing the Invoice Verification, the following entry gets generated.

GR/IR Clearing a/c……..……………..Dr. 70

Freight Clearing a/c……………………Dr. 10

To Vendor a/c ……………………………….70

To Vendor a/c………….……………………10

2) PURCHASE – TRADED GOODS

In case of traded goods, the entries would be as below:

On receipt of the goods

Inventory (Traded) a/c…………………………..Dr. xxx

To GR/IR Clearing a/c………………………………….xxx

On doing the Invoice Verification, the following entry is generated.

GR/IR Clearing a/c……………………………Dr. xxx

To Vendor a/c…………………………………………..xxx

3) PURCHASE – CONSUMABLES

In case of Consumables, the entries would be as below:

On receipt of the Consumables

Inventory (Consumables) a/c…………………………..Dr. xxx

To GR/IR Clearing a/c………………………………….xxx

On doing the Invoice Verification, the following entry is generated.

GR/IR Clearing a/c……………………………Dr. xxx

To Vendor a/c…………………………………………..xxx

4) PURCHASE – PACKING MATERIAL

In case of Packing Material, the entries would be as below:

On receipt of the Packing Material

Inventory (Packing Material) a/c…………………………..Dr. xxx

To GR/IR Clearing a/c………………………………….xxx

On doing the Invoice Verification, the following entry is generated.

GR/IR Clearing a/c……………………………Dr. xxx

To Vendor a/c…………………………………………..xxx

5) IMPORT PURCHASES

In case of Import Purchases, the process remains the same but for the additional charges, which are included in the cost of inventory.

The same is processed in MM module.

The following accounting entry gets generated on receipt of goods.

Inventory a/c……………………………..Dr. xxx

To GR/IR Clearing a/c………………………..xxx

To Freight Clearing…………………………..xxx

On doing the Invoice Verification, the following entry gets generated.

GR/IR Clearing a/c………………………Dr.  xxx

Freight Clearing a/c…………………….Dr. xxx

To Vendor a/c…………………………………xxx

To C&F Vendor……………………………….xxx

6) PURCHASE RETURNS

The transactions related to purchase returns are processed in MM.

The entries that get generated on processing such transactions are:

GR/IR a/c…………………………………..Dr. xxx

To Inventory a/c……………………………….xxx

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