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Accounting Entries For Procure To Pay

The document outlines the accounting entries for the procure to pay (P2P) process. Key events include: 1. Receipt of inventory or expense items which results in a debit to a receiving inspection account and credit to the appropriate accrual account. 2. Delivery of items which results in a debit to the inventory or expense account and credit to the receiving inspection account. 3. Creation of invoices which results in a debit to the appropriate accrual account and credit to the liability account. 4. Payment of invoices which results in a debit to the liability account and credit to the cash clearing account.

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4K views3 pages

Accounting Entries For Procure To Pay

The document outlines the accounting entries for the procure to pay (P2P) process. Key events include: 1. Receipt of inventory or expense items which results in a debit to a receiving inspection account and credit to the appropriate accrual account. 2. Delivery of items which results in a debit to the inventory or expense account and credit to the receiving inspection account. 3. Creation of invoices which results in a debit to the appropriate accrual account and credit to the liability account. 4. Payment of invoices which results in a debit to the liability account and credit to the cash clearing account.

Uploaded by

majid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting Entries for Procure to Pay (P2P)

Purchasing/PO module:

Event Accounting Entries

1. Creation of Requisition No accounting entries

2. Creation of Purchase Order (PO) No accounting entries

Inventory Destination Receipts

3. Receipt of Inventory Items


Receiving Inspection A/c Dr
Inventory AP Accrual A/c Cr

Note: Accounting Entries for Inventory Items can be created at Receipts only whereas for
Expense Items it can be done at Period End OR Receipts as applicable.

Expense Destination Receipts

4. Receipt of Expense Items


Receiving Inspection A/c Dr
Expense AP Accrual A/c Cr

Expense Items with Receipts at Period End

5. When Receipts at Period End set up is done for Expense items,

PO Charge A/c
To Expense AP Accrual A/c Cr

6. When next PO period is opened, reversal entry for point 7 is created,

Expense AP Accrual A/c


To PO Charge A/c Cr

Inventory module:

Event Accounting Entries

1. Delivery of Inventory Items


Material/Inventory A/c Dr
(Standard Cost)
To Receiving Inspection A/c Cr (PO Price)
Purchase Price Variance A/c Dr/Cr# (as applicable)

#Purchase Price Variance (PPV) is the difference between PO price and Standard Cost.

2. Delivery of Expense
Items PO Distribution Charge A/c Dr
To Receiving Inspection A/c Cr

3. Purchase Return
Inventory AP Accrual A/c Dr
To Inventory A/c Cr

Payables/AP module:

Event Accounting Entries

1. Creation of Inventory Item Invoice

Inventory AP Accrual A/c Dr


To Liability A/c Cr
Invoice Price Variance* A/c Dr/Cr (if any)

* Invoice Price Variance=Invoice Price-PO Price

2. Creation of Expense Item Invoice


Expense AP Accrual A/c Dr
To Liability A/c Cr

3. Payment of Invoice (Inventory/Exp)


Liability A/c Dr
To Cash Clearing* A/c Cr
To Discount A/c Cr (If any)
To Gain/Loss A/c Cr (Foreign Exchange G/L if any)

* Cash Clearing is used where Cash Management module is in place else it will directly hit
Cash/Bank Account for payment.

Other Entries:

4. Good return to Supplier


Liability A/c Dr
To Inventory/Expense AP Accrual A/c Cr

4. Refund through Credit Memo


Liability A/c Dr
To AP Accrual/Charge A/c Cr

5. Creation of Prepayment Invoice


Prepaid Expense A/c Dr
To Liability A/c Cr

7. Payment of Prepayment Invoice


Liability A/c Dr
To Cash Clearing A/c Cr

8. Apply prepayment with Standard Invoice


Liability A/c Dr
To Prepayment A/c Cr

9. Creation of Credit Memo


Liability A/c Dr
To AP Accrual A/c/ Expense A/c Cr

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