Purchasing Cycle - Enter/ Match Journal Entries

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Posted on by Mahmoud Saadi

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It's commonly known that the ideal purchasing cycle which consists of four main steps generates journal entries that differ in every single step according to the case.

In an inventorial item example, the following journal entries are generated;

1- Purchase Order entry

2- Receiving goods

Debit (Dr.) Inventory
Credit (Cr.) Purchase Accrual

3- Invoicing using the (Enter/Match transaction)
Dr. Purchase Accrual

Cr. Accounts Payable

4- At invoice payment

Dr. Accounts Payable
Cr. Cash

And it is taken for granted that the Purchase Accrual account gets cleared to zero when the Invoice is posted – as long as the Invoice Quantity is greater than or equal to the Receipt Quantity. If the Invoice Quantity is less than the Receipt Quantity, a balance will remain in the Purchase Accrual account (the value of the difference between the Receipt Quantity and the Invoice Quantity) and will be cleared when the remaining quantity is invoiced.

Now, let me propose the problem I am facing with certain transactions which might be related to un-matched receiving and invoice quantity.

Receiving | RCT20000000014745

When receiving inventorial items, a receiving transaction with three line items of an extended cost of ( (A)2,858.63 , (B) 3,267.00 and (C) 11,798.43 ) and a landed cost of (D) (427.03). The following journal entries are generated;

	Debit	Credit
Raw Materials Warehouse	17924.05	-
Purchase Accrual	-	17,924.05
Raw Materials Warehouse	427.03	-
Purchase Accrual	-	427.03

Note; ( the Landed cost value is usually an estimation which is put based on historical values, this value might differ when the invoice is delivered )

Invoicing (Enter/ Match)

Three invoice were posted for the previous transaction, as follows;

RCT20000000014957

The first invoice is matched to the receiving line item (C) 11,798.43 This journal entry is generated;

	Debit	Credit
Raw Materials Warehouse	-	1,626.66
Accuracy & Pricing Difference	-	10.30
Suppliers	-	10,161.47
Purchase Accrual	11,798.43	-

RCT20000000014959

The second invoice is matched to the receiving line item ((A) 2,858.63 , (B) 3,267.00 , generating the following journal entry:

	Debit	Credit
Raw Materials Warehouse	-	216.56
Suppliers	-	5,909.06
Purchase Accrual	6,125.62	-

RCT20000000015456

The third invoice is matched to the remaining value of the landed cost (which is larger than the estimated value in the receiving ) = 459.84

	Debit	Credit
Raw Materials Warehouse	32.81	-
Suppliers	-	459.84
Purchase Accrual	427.03	-

In addition, additional journal entries was generated right after the previous one (Cost Adjustment) as follows;

	Debit	Credit
Raw Materials Warehouse	-	19.97
Suspense Non financial \ General	19.97	-

From an Inventorial perspective, SEE30303 includes the following records now;

DOCNUMBR	DOCTYPE	EXTDCOST	DEBITAMT	CRDTAMNT
RCT20000000014745	4	2926.2819	2926.2819	0
RCT20000000014745	4	0.44932	0.44932	0
RCT20000000014745	4	3344.3819	3344.3819	0
RCT20000000014745	4	0.45195	0.45195	0
RCT20000000014745	4	12079.03068	12079.03068	0
RCT20000000014745	4	0.48238	0.48238	0
RCT20000000014957	11	-1626.2307	0	1626.2307
RCT20000000014957	11	-0.28311	0	0.28311
RCT20000000014959	11	-100.99557	0	100.99557
RCT20000000014959	11	-0.04565	0	0.04565
RCT20000000014959	11	-115.42557	0	115.42557
RCT20000000014959	11	-0.09551	0	0.09551
RCT20000000015456	12	5.17926	5.17926	0
RCT20000000015456	12	0.05417	0.05417	0
RCT20000000015456	12	5.91926	5.91926	0
RCT20000000015456	12	0.06166	0.06166	0
RCT20000000015456	12	21.56328	21.56328	0
RCT20000000015456	12	0.03587	0.03587	0

I have several questions regarding the case above,

1- First of all, and most importantly, why the 'Inventory Account' is 'Credited' in the invoices journal entries?

2- Why the 'Suspense Non financial \ General' is included in the journal entries as well ?

3- After all, is this a normal behavior in which I could ensure that there is no cost variance among the modules?

Please advice,

Looking forward to hearing from you

Best Regards,

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Hello Mahmoud,

First I would like to welcome you to the Dynamics GP community; I can see that this is your first question here!

For your first journal that was created after posting the transaction # RCT20000000014957, you have affected your inventory when doing the shipment with the amount of “11,798.43”, but when you invoiced the items you have invoiced the amount of “10,161.47”, therefore your inventory account was over estimated with the amount of “1,626.66”, therefore Dynamics GP has reduced your inventories with this amount and closed the journal to the Accrued Purchases Account, and the same case applied to your second journal that was created after posting the transaction #RCT20000000014959.

For your third journal that was created when posting the Landed Cost invoice, your expected amount was less than the actual invoice, therefore and following the accounting standards you should handle the difference and increase your inventory value with the amount of “32.81” which is exactly what has been done by the application.

Finally for the cost adjustment journal, looks like you have made adjustments on the items received with this receiving; adjusted items will need to be followed to correctly handle your inventory value versus the general ledger. Looks like one of your items has been expensed to account called “Suspense Nonfinancial \ General” in the first transaction with the original cost, and when the item cost changed due to the landed cost changes, your expense account affected as well.

Above will answer your first couple of questions, however for the last question about the normality of such an operation I can assure you that this is what International Accounting Standards states and this is the correct treatment for such a case, and the product tied the inventory module to the General Ledger by doing these adjustments.

Hope that my answer clarified your situation, please feel free to contact me if you have any concerns.

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Mahmoud Saadi 32,738 on at

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Dear Mr. Mohammad

Your prompt response is highly appreciated. Though, I needed to do further testing on similar cases.

Theoretically speaking, I am convinced with the overall explanation which you provided. But I still consider specifying the inventory layers related to the " cost adjustment amount (19.97 ) " as quite ambiguous and misleading.

I will be sharing any further questions or findings regarding this specific point.

Thanks for your help,

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