Understanding the Purchase Flow

Each time you purchase new goods (especially if you are using the inventory module), you should have a rough idea of what’s going on in order to get the system to work in your favour.

Supplier Invoice:

As shown in the previous unit, you can automatically copy your Purchase Orders to your Supplier Invoice (see course unit). The invoice would then execute the following double entry.

  • CR Account Payable (assigned in finance settings, supplier contact form)
  • DR Purchase account (assigned in product or product category)

Goods Receipt:

Since you bought new goods, you would then expect to receive these goods at one point. Again, this is something you can copy from your Purchase Order (see course unit).

As soon as you validate the goods, the double entry is as follow:

  • DR Inventory (assigned in inventory location)
  • CR Purchase account (assigned product, product categ or supplier location)

Goods Issue:

Lastly, every time you sell some goods, the double entry for this activity is such:

  • CR Inventory
  • DR Cost of Goods Sold (assigned in product, product categ, customer location)

2 thoughts on “Understanding the Purchase Flow”

    • Correct Answer: a) True

      Explanation: Yes. The double entry feature are applicable to all the processes like invoice, goods receipt, goods issue, payment etc.


Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.