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Accounts Payable Journal EntriesMarch 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

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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 getsgenerated.

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

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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

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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.

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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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