PURCHASE ORDER GENERAL LEDGER POSTING LOGIC

When Purchase Orders are updated after receipts, the amounts are posted into the Accounts Payable (AP) module for the associated vendor of the order. The Purchase Order to General Ledger Update (PO5300) accomplishes this. The general ledger (G/L) transactions created that affect the AP module is the Credit to the vendor accounts (if set-up) or the Accounts Payable (AP) ‘Accrued Liabilities’ account, based upon the currency/branch combination (GB0700), for the total purchase cost (Standard Cost + Taxes and any Freight included). The cost should not be confused with the vendor price of the item. For example an item may cost $15.20 and the purchase order price may be $16.80 due to the fact that I may have changed my supplier for this PO. The purchase order could be for 2 with a total purchase price of $33.60 but the general ledger posting would be for the cost of $30.40. The difference of $3.20 will be handled by the Accounts Payable purchase variance when purchase order matching is done at invoice entry time.

Purchase Order General Ledger Posting:

When entering a Purchase order:

PO2000 (Order Entry)
Purchase amount =
Vendor Price of item (PO0300) * calculated or entered quantity issued

/ price per of item (PO0300)
+
any other charges (ie. Freight) based upon the
Vendor for which the order is placed.

The detail line entry defaults the General Ledger Account to either the Inventory Account of the product group/reason code/warehouse combination or if that is not set-up to the vendor General Ledger Account.

The Purchase Order is then received by Receipts Entry - (PO5100). The corresponding G/L transactions for each purchase order detail line in the Purchase Order to General Ledger update (PO5300) are as follows (General Ledger account based upon … with amount):

Debit -

General Ledger account on the Purchase Order detail line, for the total purchase cost (standard cost of item + taxes and any freight included).

Credit -

One of the accounts below with the total purchase cost (standard cost of item + taxes and any freight included):

One of either the:

General Ledger Account based upon the vendor.

Accrued Liabilities Account based upon the vendor.

If none of the vendor accounts are set up, the currency Accounts Payable Accrued Liabilities account base upon the currency of the vendor and the warehouse of the purchase order/branch combination (GB0700) is credited with the transfer price plus exchange amount.

If the Vendor Accrued Liabilities is not entered, the Freight, Duty and Other clearing accounts based on the reason code/warehouse combination for the item will be credited with their respective costs.

Reason Codes are defined to the product groups that the product belongs to and can have different accounts based upon the warehouse location.

See Product Group Master Maintenance (IN1000), Reason Code Master Maintenance (GB4300)

Purchase Order Matching via Accounts Payable Invoices

Once the PO is received it is available for purchase order matching in the accounts payable module. When the Accounts Payable invoice is entered in AP1100 there is an option selection on the invoice type (Purchase Order) to enter/match the invoice to a purchase order. A matching screen will display all receipts available for the purchase order entered and allow for actual cost and/or quantity to be entered. Corresponding distribution will be created to the Accounts payable general ledger distribution utilizing these amounts. If Vendor accounts are set-up then debit postings to the account is used (same as ‘Credit’ above). The offset credit posting will be to that of the vendor Accounts Payable Regular Account or to the Account Payable Regular Account of the currency/branch combination (GB0700). For any variances, the variance Clearing Accounts based upon the reason code/product group combination (See above reason codes) of the item, on the receipt matched, is used.