Accounting for Purchases

The accounting created for purchases is effected by the time the stock is received and the point at which the invoice is received. Brightpearl handles all of your purchasing accounting entries for you. This document will help you understand what accounting entries are made each time you update your Purchase Orders.

Receiving Inventory

These are the accounting entries when inventory is received on a Purchase Order:

Notice how the balancing entry is made into Stock received not invoiced. Double-entry book-keeping rules say that every journal posted to accounts must balance (debits = credits). The invoice hasn't yet been received, but it is still necessary to recognise the liability to pay for the stock. When the invoice is received from the supplier this entry will be reversed and dropped into the Creditors account against the relevant supplier instead...

Receiving the Invoice

These are the accounting entries when the invoice is received on a Purchase Order:

As the stock has already been received no entry is made into the stock account; this would duplicate your stock value. Instead, the balancing entry is against Stock received not invoiced. Since this is used when the stock was originally received, this account is now zeroed out and everything balances.

The same accounting is created whether the invoice or inventory are received first.

What if the actual supplier invoice shows a different price after I have received the items?

Let's say, for example, that you have ordered and received some items from your supplier. When you receive the invoice from your supplier you realise the price has now actually increased since you received the items in Brightpearl. Therefore the items were originally recorded at an incorrect stock value. There's no need to worry, Brightpearl will calculate the necessary accounting for you, all you need to do is update the item price on the order BEFORE receiving the invoice.

Using the following example, let's take a look at the accounting entries that will be made:

Order:  100 items at £5.50 each, plus VAT
Items received?  YES, at £5.50 each
Invoice received? YES, at £5.60 each

Transaction 1: Receive the items

Transaction 2: Receive the invoice

When the invoice is received the items are more expensive, working out at an increased cost of £10 overall. This is posted directly to cost of sales as it is not possible for Brightpearl to identify which stock items the extra value belongs with.

Nominal Code Rules on Purchase Orders

When lines are added to a purchase order they will be assigned a nominal code for the accounting. There are various things that influence where this code comes from, including purchase settings which are user defined.

• Initially the purchase order will use the product record:
  If it is a stock tracked product and you are using cost of sales accounting your product will use a stock code (1000-1199).
  If it is a non-stock tracked product or you are not using cost of sales accounting your product will use a purchase code (5000-5999)
• A nominal code set against the supplier:
  Non-stock tracked products will be overridden by a code set against the supplier.
  But stock tracked products will remain on the asset code set against the product (can be switched off).
• Manually changing the nominal code:
  If it is a non-stock tracked product the code can be manually changed directly on the purchase order (applies to individual order only).
  If it is a stock tracked product it is locked and cannot be changed on the purchase order (can be switched off)

Your purchase order nominal code for stock tracked products will usually need to be an asset code and so Brightpearl prevents the supplier record from overriding the product code as well as preventing the manual change of the code. If you are really sure it is possible to switch this nominal code locking off so that even stock tracked products will use the supplier code, whether it is an asset code or not!

Switch off PO nominal code locking at Setup > Purchases > Purchase settings, set "Always use asset nominal code for inventory items on Purchase Orders?" to No.

Entering Multi-code Purchase Invoices for Stock

Some supplier invoices will contain items that you may want to allocate to different nominal codes; for example:

Since this invoice contains product items (that you are tracking the stock of), you must create a Purchase Order and then receive an invoice against the Purchase Order.

For the Import Duty line, you can add a "misc item" to the order, renaming it to "Duty" (or similar) and setting the nominal code to 5101 accordingly. In this way you can create an order that contains both products and non-products.

This will post the total value of the invoice to the supplier account and split up the lines in the accounting database so that you can track spending more accurately.

Purchase Credits & Returns to Supplier

If you create a Purchase Credit the accounting is generated at the point you click Credit on the record, you would normally do this once you have received confirmation from your supplier that they will honor it. These are the accounting entries created when you receive the credit:

Since stock items cannot be added onto Purchase Orders a manual stock correction is required in order to recognise any returned stock items: