As it happens, not always there’s an invoice for inventory purchase, but since you received the materials, you’re more than likely to require using them already. So how you’d proceed? 

It’s in fact not just using those materials, but also recognizing an asset and a liability within your accounts as you’re liable for the risks arising from owning physically the goods mentioned. With accruals basis accounting there’s a term we often use for such situations. What you’d do in such a case is ‘accrue’ for the liability and for the asset within your accounts based on your best estimate as to what’s the price of the goods received. Normally you’d have an agreed price list or publicly available prices or something similar based on which you could estimate the payable amount.

Note that this accrued amount should always be adjusted with the actual invoice once it’s obtained.

To continue with our previous example, say that you received 100 units of bread with a unit price of 1.5 CU as per your agreement with the supplier. Your accounting entry would then look something like this:

However, say that it later turned out your supplier had issued a new price list and one unit is now 1.6 CU. For the sake of our example let’s presume that you accepted this increase and as such you make a corrective entry alongside with recognizing that you now have an invoice and not an estimate any longer.