It happens in many companies that deal with inventory – they get the goods with a note, but no invoice. Usually an invoice is sent separately and a bit later on. However, during normal course of business and in most companies, you would expect to start selling the goods as soon as possible. But how can you do it with goods that the supplier has not yet sent the invoice for? You need a source document for every entry on your balance sheet and in this case for proper entry it’s missing.
Essentially you cannot leave those goods out of the balance sheet, because they are your company’s assets. So, to overcome this problem, you will recognize those items as goods held for sale (or materials etc) and on the other side of the balance sheet you take up a liability on a separate line called ‘Payables to suppliers (invoice not yet received)’. The entry looks something like this:
Cr Payables to suppliers (invoice not received)
Now when the invoice is received, you need to move the payable from this line to another, the proper one. The entry is as follows:
Dr Payables to suppliers (invoice not received)
Cr Payables to suppliers
When the entries are simple, so should be determining the amount payable for goods (and essentially the cost price of those goods on the balance sheet). It is done either with price listing agreed between the company and the supplier, a bidding or general price of the good (obtainable for public price lists of the supplier).
Do make sure you have all the inventory received with a note recognized on the balance sheet as soon as possible and also don’t forget to ensure that the account with ‘(invoice not received)’ is essentially always debited. The balance of this account should never be increasing constantly in time, but if anything may be fluctuating depending on the type and volume goods purchased.