Purchase order accruals

This activity is optional. It is used to account for the value of goods, text, services or labour items that have been received but have not yet been invoiced. It also accounts if these are returned and waiting credit. Using accruals will give you a more accurate financial picture.

Note: Accruals for foreign currency purchase orders are calculated using the purchase order exchange rate.

As items are received or returned their value is updated to the balance sheet nominal account, asset of stock. To provide a true and fair account of your profits, the asset needs to be balanced with the expense of the goods. This is achieved by postings made to the accrued receipts nominal account. Accrued orders generate a positive value to account for the anticipated expense and returns generate a negative value.

To ensure the expense is not accounted for twice, when items are eventually invoiced/credited, the accrued expense is reversed out of the Balance Sheet. This is done automatically for you. To do this, as you record the accrued expense, you must enter a reversal date for the system to use.

Note: If the order is still pending invoice when the accrual is reversed, the values are made available for accrual.

In the first instance, accruals are posted to the Nominal Ledger posting file. They can only be applied to nominal accounts in the Nominal Ledger.

Before posting the accruals to the Nominal Ledger, you can generate a report, which displays the accrued values.

Note: Miscellaneous stock items are included in the report but are not included when accruals postings are made.

You can choose to include the amounts for text order or service/labour items when you create purchase order and return accruals. If you include the amounts, these are added to the Value to be Accrued column in the Purchase Order and Return Accruals window.

Open: Purchase Order Processing > POP Utilities > System Set Up > POP Settings | Order Processing.

• For text order lines, select Confirm with Goods Received, then enable Include text order lines in accruals.
• For service/labour lines, select Confirm as Service/Free Text, then enable Include service/labour order lines in accruals.

See Record receipts prior to invoicing (POP Settings).