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.

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.

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.