Manual
Posting purchases
What each posting writes
| Posting | Vendor ledger | Item ledger | General ledger |
|---|---|---|---|
| Receive (order) | Nothing | A Purchase entry bringing the items into stock, at the order’s cost without VAT | Inventory debited; Goods Received Not Invoiced credited |
| Invoice (order) | An Invoice entry for the total including VAT | The invoiced quantity marked on the received entries | Goods Received Not Invoiced cleared; purchases, VAT and the payable posted |
| Post (invoice), Receive and Invoice (order) | Both of the above in one posting | Inventory debited against Direct Cost Applied; purchases, VAT and the payable posted | |
| Post (credit memo), Ship and Credit (return order) | A Credit Memo entry, lowering what is owed | A Purchase entry taking the items out of stock | The other way round |
A G/L account line (rent, power, gas) posts its amount without VAT to its own account, with no item entries. A resource line posts to the purchases account of its posting groups.
Which accounts
| Amount | Account | Decided by |
|---|---|---|
| The payable (total including VAT) | Payables Account | The vendor’s Vendor Posting Group |
| Item and resource lines (without VAT) | Purchases GL Account | General Posting Setup: the document’s Gen. Bus. Posting Group with the line’s Gen. Prod. Posting Group |
| G/L account lines | The line’s own account | The line |
| The VAT | The purchases VAT account | VAT Posting Setup: the document’s VAT Bus. Posting Group with the line’s VAT Prod. Posting Group |
| The stock received | Inventory Account | Inventory Posting Setup: the line’s location with the item’s Inventory Posting Group |
| The stock’s other side | Direct Cost Applied Account, or Goods Received Not Invoiced Account until the invoice comes | General Posting Setup |
Direct Cost Applied is usually the purchases account itself, as at Passion Bakery (both 220200 Ingredients Purchased). The invoice then debits purchases and the stock credits it by the same amount, so what was bought ends in inventory, not in expenses, until it is used or sold.
Goods received, not yet invoiced
When an order is received before its invoice comes, the stock is in inventory but nothing is owed to the vendor yet. The Goods Received Not Invoiced Account (120200 at the bakery) holds its value meanwhile. The invoice clears it at the received cost and moves that cost to Direct Cost Applied.
An example from the bakery
Moses orders 20 bags of wheat flour from Nile Flour Millers at 212,400 a bag including VAT: 4,248,000, of which 648,000 is VAT. The flour (inventory posting group RAW, general product posting group INGREDIENT) is valued at 3,600,000 without VAT: 3,600 a KG for 1,000 KG.
Receive when the flour arrives:
| Account | Debit | Credit |
|---|---|---|
| 110500 Raw Materials Inventory | 3,600,000 | |
| 120200 Goods Received Not Invoiced | 3,600,000 |
Invoice when the vendor’s invoice comes:
| Account | Debit | Credit |
|---|---|---|
| 120200 Goods Received Not Invoiced | 3,600,000 | |
| 220200 Ingredients Purchased (Direct Cost Applied) | 3,600,000 | |
| 220200 Ingredients Purchased (Purchases) | 3,600,000 | |
| 120300 VAT Payable/Receivable | 648,000 | |
| 120100 Trade Creditors | 4,248,000 |
In the end the flour is in inventory at 3,600,000, the VAT can be claimed back, and the bakery owes Nile Flour Millers 4,248,000, due in 30 days.
When the invoice’s cost differs
Stock received on an order is valued at the order’s price. If the vendor invoices it at another price, the difference becomes the stock’s actual cost:
- on the part still in stock, it stays with the receipt;
- on the part already used or sold, it is passed on to what took it: the cost of goods sold, an adjustment, or the bread a bake made from the flour.
So a later invoice never leaves stale costs behind. The item’s Last Direct Cost becomes the invoiced cost, and its Unit Cost is worked out again.
Where to look afterwards
Vendor Ledger Entries, Posted Purchase Receipts, Posted Purchase Invoices, Item Ledger Entries and Value Entries, and the General Ledger Entries, each with the vendor’s name as its Source Name.