{"id":5314,"date":"2015-04-20T06:10:17","date_gmt":"2015-04-20T04:10:17","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=5314"},"modified":"2015-04-19T06:11:19","modified_gmt":"2015-04-19T04:11:19","slug":"recognizing-purchase-of-materials","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/recognizing-purchase-of-materials\/","title":{"rendered":"Recognizing purchase of materials"},"content":{"rendered":"

Making purchases is part of everyday business. You cannot cooperate without buying certain services or materials (unless you\u2019re actually producing materials and finished products from them yourself and don\u2019t require any outside service, i.e. internet, paper to print invoices on etc.). So as such you need to familiarize yourself with recognizing accounting for such payables and moreover, for the corresponding entry.\u00a0<\/p>\n

Now, a material can both be something you\u2019d account into inventories or directly to expenses if it\u2019s something you don\u2019t use in production but it\u2019s used as a side-product, i.e. chemicals used for cleaning etc. For the purposes of showing how you\u2019d recognize buying inventory we\u2019re going to assume we bought say bread for manufacturing of sandwiches. Say you bought 100 units of bread for 150 CU (so that\u2019s 1.5 CU for one unit of bread). It\u2019s one thing to make the entry within the balance sheet, but another to recognize the purchase of units within your detailed inventory ledger (detailed listing where you\u2019d show how many units with one unit price you bought).<\/p>\n

If the latter is something for yourself to work out, whether you keep spreadsheets for that or invest into an accounting software that does it for you, we would like to show you how the general recognition of a supplier payable should look like:<\/p>\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/tr>\n<\/tbody>\n
#<\/strong><\/td>\n<\/td>\nDebit-Credit<\/strong><\/td>\n<\/td>\nAccount name<\/strong><\/td>\n<\/td>\nAmount\u00a0<\/strong><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
1<\/em><\/td>\n<\/td>\nDebit<\/em><\/td>\n<\/td>\nInventory<\/em><\/td>\n<\/td>\n150<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\n<\/td>\nCredit<\/em><\/td>\n<\/td>\nPayable to suppliers<\/em><\/td>\n<\/td>\n150<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Note here that the purchase may be subject to VAT as in within the 150 recognized is also a VAT amount which you would be able to ask back or deduct from your payable VAT. If that\u2019s the case and assuming the VAT in this example is 10 CU, the accounting entry would instead look like this:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/tr>\n<\/tbody>\n
#<\/strong><\/td>\n<\/td>\nDebit-Credit<\/strong><\/td>\n<\/td>\nAccount name<\/strong><\/td>\n<\/td>\nAmount\u00a0<\/strong><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
1<\/em><\/td>\n<\/td>\nDebit<\/em><\/td>\n<\/td>\nInventory<\/em><\/td>\n<\/td>\n140<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\n<\/td>\nDebit<\/em><\/td>\n<\/td>\nVAT prepayment<\/em><\/td>\n<\/td>\n10<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\n<\/td>\nCredit<\/em><\/td>\n<\/td>\nPayable to suppliers<\/em><\/td>\n<\/td>\n150<\/em><\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Making purchases is part of everyday business. You cannot cooperate without buying certain services or materials (unless you\u2019re actually producing materials and finished products from them yourself and don\u2019t require any outside service, i.e. internet, paper to print invoices on etc.). So as such you need to familiarize yourself with recognizing accounting for such payables […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80],"tags":[],"class_list":["post-5314","post","type-post","status-publish","format-standard","hentry","category-2-10-purchases-and-payables"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=5314"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5314\/revisions"}],"predecessor-version":[{"id":5315,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/5314\/revisions\/5315"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=5314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=5314"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=5314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}