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Hi,
I’m confused about when should we record purchase transactions. Do we post entries into journal when a goods received note is received or when we receive invoice from suppliers? And what’s the correct accounting treatment for goods received but not invoiced?
For sales transaction, do we record sales when we send out the goods despatch note or when we bill our invoice? Or when customer signs on goods delivery note? These seem to be important in cut-off assertions. Thanks a lot! 😉
The first bookkeeping double entry is when the invoice is received (Dr Purchases, CD Payables). Until then everything is memorandum eg increase inventory records on goods receipt, attach GRN to order.
Goods received not invoiced need an accrual at year end. Dr Purchases, Cr Accruals/payables.
On sales, the double entry is made when or shortly after the invoice is raised (Dr Receivables, CD Sales). Many computer systems will do this automatically on invoice production.
If the gods have not been despatched when the invoice is raised, then there is a cut-off issue because revenue should not be recognised until the risk and reward of ownership have been transferred. This may need adjustment at year end.
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