Standard Purchase Path

The most common purchase flow: Purchase Order → Item Receipt → Vendor Bill → Vendor Payment

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Flow Diagram

STANDARD PURCHASE PATH
─────────────────────────────────────────────────────────────────

┌─────────────────┐     ┌─────────────────┐     ┌─────────────────┐     ┌─────────────────┐
│ PURCHASE ORDER  │     │  ITEM RECEIPT   │     │  VENDOR BILL    │     │VENDOR PAYMENT   │
│                 │     │                 │     │                 │     │                 │
│  GL: None       │ ──▶ │  GL: Inv + IRNB │ ──▶ │  GL: IRNB → A/P │ ──▶ │  GL: A/P → Cash │
│  Inv: On Order  │     │  Inv: ↑ On Hand │     │  Inv: None      │     │  Inv: None      │
└─────────────────┘     └─────────────────┘     └─────────────────┘     └─────────────────┘

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Stage 1: Purchase Order Creation

What Happens

Action	Result
Create PO	Record saved with status "Pending Receipt"
Items added	Expected quantities recorded
Pricing agreed	Vendor pricing captured
Approval workflow	May require manager approval

Inventory Impact

None - Purchase Order does not affect inventory quantities.

INVENTORY ON PURCHASE ORDER
─────────────────────────────────────────────────────────────────

Before PO:
┌─────────────────────────────────────────┐
│ Item: Widget-001                        │
│ On Hand:      50                        │
│ On Order:      0                        │
│ Available:    50                        │
└─────────────────────────────────────────┘

After PO (Qty: 100):
┌─────────────────────────────────────────┐
│ On Hand:      50  (unchanged)           │
│ On Order:    100  (expected from vendor)│
│ Available:    50  (unchanged)           │
└─────────────────────────────────────────┘

GL Impact

None - Purchase Order does not post to General Ledger.

Purchase Order Statuses

Status	Meaning
Pending Supervisor Approval	Needs approval
Pending Receipt	Approved, waiting for goods
Partially Received	Some items received
Pending Billing	Fully received, awaiting bill
Pending Billing/Partially Received	Partial receipt, more expected
Fully Billed	Vendor bill created
Closed	Manually closed

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Stage 2: Item Receipt

What Happens

Action	Result
Create IR from PO	Receipt record linked to PO
Confirm quantities	Received quantities recorded
Assign location	Inventory added to location
Save IR	Inventory physically increased
PO status updates	Changes to "Pending Billing"

Creating Item Receipt

ITEM RECEIPT CREATION
─────────────────────────────────────────────────────────────────

Purchase Order #PO-001
├── Line 1: Widget-A (Qty: 50)  ──▶  Receive: 50 ✓
├── Line 2: Widget-B (Qty: 30)  ──▶  Receive: 30 ✓
└── Line 3: Widget-C (Qty: 100) ──▶  Receive: 75 (partial)

Result: Item Receipt #IR-001 created
        PO Status: Pending Billing/Partially Received

Inventory Impact

INVENTORY AFTER RECEIPT
─────────────────────────────────────────────────────────────────

Before Receipt:
┌─────────────────────────────────────────┐
│ On Hand:      50                        │
│ On Order:    100                        │
│ Available:    50                        │
└─────────────────────────────────────────┘

After Receipt (100 units received):
┌─────────────────────────────────────────┐
│ On Hand:     150  (increased by 100)    │
│ On Order:      0  (received)            │
│ Available:   150  (same as On Hand)     │
└─────────────────────────────────────────┘

GL Impact

Account	Debit	Credit	Why?
Inventory Asset	$5,000		You now HAVE goods (Asset ↑)
IRNB*		$5,000	You OWE for goods received (Liability ↑)

*IRNB = Inventory Received Not Billed (clearing account)

ITEM RECEIPT GL EXPLAINED
─────────────────────────────────────────────────────────────────

What happened: Goods arrived at your warehouse

Inventory (Asset)          $5,000  Dr
  └── You now HAVE 100 widgets worth $5,000

IRNB (Liability)                   $5,000  Cr
  └── You haven't been billed yet, but you OWE for these goods
  └── This is a "temporary" liability until the bill arrives

Think: "I got the goods, but no invoice yet"

Partial Receipt

PARTIAL RECEIPT SCENARIO
─────────────────────────────────────────────────────────────────

PO #001: 100 units ordered
    │
    ├── IR #001: 40 units received
    │   └── PO Status: Pending Billing/Partially Received
    │
    ├── IR #002: 35 units received
    │   └── PO Status: Pending Billing/Partially Received
    │
    └── IR #003: 25 units received (final)
        └── PO Status: Pending Billing (fully received)

---

Stage 3: Vendor Bill

What Happens

Action	Result
Bill from PO	Vendor Bill linked to PO and IR
Match invoice	Vendor invoice number recorded
Verify amounts	Match against PO pricing
Save Bill	A/P recorded
PO status updates	Changes to "Fully Billed"

GL Impact (With Prior Item Receipt)

Account	Debit	Credit	Why?
IRNB	$5,000		Clear temporary liability (Liability ↓)
Accounts Payable		$5,000	Now formally owe vendor (Liability ↑)

VENDOR BILL GL EXPLAINED (After Item Receipt)
─────────────────────────────────────────────────────────────────

What happened: Vendor sent the invoice

IRNB (Liability)           $5,000  Dr
  └── Clear the "received but not billed" liability

A/P (Liability)                    $5,000  Cr
  └── Now you have a formal invoice to pay

Think: "Got the invoice, now I officially owe the vendor"

NOTE: Inventory was already recorded at receipt time!
      This entry just converts IRNB → A/P

Three-Way Match (Complete Picture)

THREE-WAY MATCH GL FLOW
─────────────────────────────────────────────────────────────────

Step 1: Item Receipt (goods arrive)
  Inventory Asset        $5,000  Dr  ← You HAVE goods
  IRNB (Clearing)                    $5,000  Cr  ← Temp liability

Step 2: Vendor Bill (invoice arrives)
  IRNB (Clearing)        $5,000  Dr  ← Clear temp liability
  Accounts Payable                   $5,000  Cr  ← Formal liability

Net Result:
  Inventory increased by $5,000 (Asset ↑)
  A/P increased by $5,000 (Liability ↑)
  IRNB = $0 (cleared)

This is called "three-way match":
  PO (what you ordered)
  + IR (what you received)
  + Bill (what vendor charged)
  = Complete audit trail

Variance Handling

Situation	GL Treatment
Bill = Receipt	No variance, standard entries
Bill > Receipt	Additional cost to inventory or variance account
Bill < Receipt	Credit to inventory or variance account

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Stage 4: Vendor Payment

What Happens

Action	Result
Create payment	Payment record created
Apply to bills	A/P reduced
Payment method	Check, EFT, Credit Card
Status update	Bills marked as "Paid In Full"

GL Impact

Account	Debit	Credit	Why?
Accounts Payable	$5,000		You no longer OWE vendor (Liability ↓)
Cash/Bank Account		$5,000	Money leaves your bank (Asset ↓)

VENDOR PAYMENT GL EXPLAINED
─────────────────────────────────────────────────────────────────

Before Payment:
  A/P = $5,000 (you owe vendor)
  Cash = $10,000 (in your bank)

After Payment:
  A/P = $0 (debt cleared)
  Cash = $5,000 (paid out $5,000)

Think: "Paying the bill = clearing the debt"

Payment Methods

PAYMENT METHODS
─────────────────────────────────────────────────────────────────

Check Payment:
  A/P                    $5,000  Dr
  Bank Account                       $5,000  Cr

EFT/Wire:
  A/P                    $5,000  Dr
  Bank Account                       $5,000  Cr

Credit Card:
  A/P                    $5,000  Dr
  Credit Card Liability              $5,000  Cr

---

Complete Timeline

GL AND INVENTORY TIMELINE - STANDARD PATH
─────────────────────────────────────────────────────────────────

Day 1: Purchase Order Created
        └── GL: Nothing posted
            Inv: On Order qty updated

Day 5: Item Receipt Saved
        └── GL: Inventory + IRNB posted
            Inv: On Hand increased

Day 10: Vendor Bill Created
        └── GL: IRNB cleared, A/P posted
            Inv: No change

Day 30: Vendor Payment Made
        └── GL: A/P + Cash posted
            Inv: No change

INVENTORY MOVEMENT TIMELINE
─────────────────────────────────────────────────────────────────

                    On Hand   On Order   Available
                    ───────   ────────   ─────────
Starting            50        0          50

After PO            50        100        50
(on order)

After Receipt       150       0          150
(received)

After Bill          150       0          150
(no change)

After Payment       150       0          150
(no change)

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Related Records

Record	Relationship
Vendor	PO.entity field
Item	PO line items
Location	Receipt destination
Terms	Payment terms
Currency	Multi-currency support
Department/Class	Cost allocation

RECORD RELATIONSHIPS
─────────────────────────────────────────────────────────────────

Purchase Order #PO-001
│
├── createdfrom: Requisition #REQ-001 (optional)
│
├── Item Receipt #IR-001
│   └── createdfrom: PO-001
│
├── Item Receipt #IR-002
│   └── createdfrom: PO-001
│
├── Vendor Bill #VB-001
│   ├── createdfrom: PO-001
│   └── receiptlist: IR-001, IR-002
│
└── Vendor Payment #PYMT-001
    └── apply list: VB-001

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Next Steps

• Direct Paths - Skip receipt or PO entirely
• Returns to Vendor - Handle vendor returns and credits