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vgardner218
February 4, 2024
Question

Item Receipts

  • February 4, 2024
  • 1 reply
  • 0 views

When material is received against a purchase order, QuickBooks creates an Item Receipt.  What is the general ledger accounting that takes place for this transaction?  We have some Item receipts that were recorded in one period but when the invoice was paid, it was not processed against this Item receipt but was paid for by check separately.  When reviewing outstanding Item Receipts, it was discovered that the bill had been paid in addition to there being and open Item Receipt in the QB system. 

 

I would like to know and understand the actual general ledger transaction that QB makes for each of these transactions.  I would think the Item Receipt transaction would Debit the Material Purchases account and establish some kind of a liability entry.  If the invoice gets paid separately from the Item Receipt transaction, I believe we would have a duplicate expense recorded.

 

I am asking for someone to outline the flow of general ledger transactions for each step in this series of transactions. 

 

The specific example is as follows:

  • A Purchase Order is issued for material. (No entry to the genera ledger)
  • Material is received in receiving department and a receipt of the material is made against the purchase order for the line items of material that is received.
  • This creates an "Item Receipt" in QB    (What is the General Ledger entry??)
  • Sometime after this an invoice is received in Accounts Payable and the invoice is paid and is NOT processed against the purchase order or Item Receipt.  This would generate a Debit to Material expense and a credit to Accounts Payable

 

 

1 reply

E
Ethel_A12
February 4, 2024

Hello there, @vgardner218.

 

Let me share some information about the process after creating purchase order in QuickBooks Desktop.

 

When you receive the items after creating a purchase order, you can create an item receipt. It should be linked to the purchase order transaction.

 

You can then create a bill against inventory to close the item receipt before paying your bills.

 

Since you have created a check to pay the purchase order, I suggest you review the check and make sure the account for the check is Accounts Payable.

 

To view the general ledger accounting of the item receipt, you can check the Transaction Journal.

 

Here's how:

 

  1. Open the item receipt.
  2. Go to the Reports tab, then select Transaction Journal.
  3. Click the Customize button.
  4. Set the appropriate reporting date.
  5. In the Columns menu, select the Item, Item Description, Qty, and Amount column.
  6. Hit OK.

 

For future reference, you can read this article about customizing and memorizing reports: Create, access and modify memorized reports.

 

Don't hesitate to click the Reply button below if you have questions about the complete workflow of the purchase order in QuickBooks Desktop. I'm always here to help. Have a great day.

V
vgardner218Author
February 5, 2024

Thank you for your response.  I still and not completely clear on the workflow of all the transaction.  Let me outline what I think I understand.

 

Purchase order issued  -  No QB general ledger entries.

Material that was ordered is received and the receipt is entered against the purchase order. - QB creates an Item Receipt and makes an entry to Debit Material Expense and credit to  some kind of a liability account, maybe Accounts Payable.

Invoice is received from the vender - Invoice is processed against the Item Receipt.  I am not sure what entry is made in QB to record this transaction.

A check is processed - QB Debits accounts payable and credits Cash.

 

Now, what are the transactions if the Item Receipt is NOT cleared when the invoice comes in and the invoice is paid by a debit to the Material Expense account and a credit to Accounts payable.  Then at a later date while reviewing open Item Receipt line items, the Item Receipt gets voided since it is discovered that the invoice was paid and did not clear the Item Receipt.  What are the General Ledger transactions that are made in QB? 

 

Also, in the example above instead of voiding the Item Receipt, what should have been the correct way to make this correction to clear the open Item Receipt and make sure all entries have been recorded properly in the general ledger.

 

M
Mark_AG
February 5, 2024

Hello there, @vgardner218.

 

I understand that you're seeking clarification on the workflow of general ledger transactions in QuickBooks. I'm here to assist you with the correct workflow and provide a detailed overview of the process.

 

  1. Item Receipt Creation: When an item is received and the receipt is entered against the Purchase Order, QuickBooks creates an Item Receipt. This results in a general ledger entry to Debit the Material Expense and Credit a corresponding liability account, such as Accounts Payable.
  2. Invoice Processing: When an invoice is received and processed against the Item Receipt, QuickBooks creates a general ledger entry to Debit Accounts Payable and Credit the corresponding liability account related to the Item Receipt.
  3. Check Processing: QuickBooks generates a general ledger entry that debits Accounts Payable and credits Cash when a check is processed.

 

If an Item Receipt is not cleared when the invoice is paid and later voided, the following general ledger transactions will be made in QuickBooks:

 

  1. Voiding the Item Receipt: QuickBooks creates a general ledger entry to Debit the corresponding liability account related to the Item Receipt and Credit the Material Expense account.
  2. Recording the invoice payment: QuickBooks creates a general ledger entry to Debit Material Expense and Credit Accounts Payable.

To ensure that all entries are recorded properly in the general ledger, it's important to process invoice payments against the corresponding Item Receipts. I also recommend asking guidance for your accountant to learn which accounts is credited or debited in the General Ledger for specific transactions based on your current situation. 

 

You can refer to these articles to learn more about receiving inventory and basic workflows in QuickBooks Desktop:

 

 

You can also learn more about the advanced inventory features in QuickBooks Desktop Enterprise.

 

If anything else comes up, feel free to leave a reply below. I'm always here to assist you.

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