[AMERICANDREAM]

Hey, this is a stupid question but my brain is just going crazy from studying that I can’t figure this out..

When does an entity record accounts payable for goods ordered? Is it when they receive the goods (preparation of receiving reports), when they place an order, or at other times??

AUD - 92
BEC - NINJA in Training
FAR - 90
REG - 88

If you think you failed, you passed.

[Missy]

Usually it's when the goods are received unless the terms and conditions say otherwise (it's rare but sometimes the payable isn't recorded until the goods pass inspection or if the shipping terms are FOB shipping point the payable may be recorded before the goods are received as soon as they are shipped).

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

Technically they can record it anytime they want, but if the entity has proper controls it shouldn't be recorded until the transaction takes place, meaning terms have been contractually agreed upon between the entity and vendor.

Usually, in larger companies and certain other industries like manufacturing or others with high volume transactions, an entity will first create a purchase order. This is usually done when the company has internally decided there is a need to purchase certain good(s).

Then that purchase order (prepared by a sales agent or purchasing agent) is sent for approval by a manager for example and then a copy of it is sent to the accounting department to record the transaction and prepare the bill (accounts payable) in the system.

Depending on the size and nature of the entity, a receiving report from the warehouse and an invoice from the vendor could first be required from the vendor, another step in the control process in order to get recorded, which still comes after the purchase order but before getting entered as accounts payable.

It might sound complicated but it's just wordy and in the real world nowadays with a computerized environment, all of this can happen virtually simultaneously.

[Anonymous]

For exam purposes I think they go with a three way match so if the purchase order, receiving report, and vendors invoice all don't match, it won't get recoded.

[AMERICANDREAM]

Thank you all!

AUD - 92
BEC - NINJA in Training
FAR - 90
REG - 88

If you think you failed, you passed.

[Author]

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