Accounting entries in Purchasing, Payables and Receivables

When we enter transactions in Purchasing, the accounting entries will get generated with respect to the following accounts.

1. When Creating a receipt:
Inventory Receiving A/C DR
Accrual Account CR

2. At the time of Receiving transactions:
Asset clearing A/c or Inventory valuation a/c DR
Inventory Receiving A/c CR

3. When a Payables invoice matched with PO:
Accrual A/C DR
Liability A/c

4. when asset addition done:
Asset A/c DR
Asset Clearing A/c CR(Asset item)
           (OR)
expense a/c DR
inventory Valuation A/C(Inventory item)

When we enter transactions in Payables, the accounting entries will get generated with respect to the following accounts.

1. Invoice: When we create accounting for an invoice, the accounting will be generated with respect to the following accounts.

Item Expense A/C      DR
Liability  A/C             CR

2. Payment: There are two stages in which the accounting may generate, based on the accounting option that we setup in Payables.
  
> Direct Pay-No Clearance: In this stage, there will be no clearance process separately and the cash account will get credited directly.

Liability  A/C    DR
Cash  A/C         CR

> Pay and Clear: In this stage, the payment and clearance process will have separate accounting entries.

At the time of Payment:

Liability A/C               DR
Cash Clearing A/C      CR

At the time of Clearance:

Cash Clearing A/C    DR
Cash A/C                  CR

 When we enter transactions in Receivables, the accounting entries will get generated with respect to the following accounts.

1. Accounting for invoice:
Receivables A/C DR
Revenue Account Cr

2. Credit memo:
Revenue Dr
Receivables A/C CR

3. Receipts:
Cash A/C DR
Receivables A/c CR

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