Brightpearl handles all of your purchase accounting entries for you. There are 6 key processes which create accounting entries, plus additional journals for allocations:

Purchase orders Journal ID
1 Receiving invoice PI
2 Receiving inventory JJ
3 Making a payment PP
Purchase credits  
1 Receive credit note PC
2 Inventory correction JJ
3 Receive refund PP
Allocating PP

These processes can be completed in any order and the same accounting journals will be created. The entries made rely on various nominal code rules and tax code rules.

Orders

Journals are automatically created and posted at the point of:

Receiving the invoice (PI journal)

The accounting created when receiving an invoice will depend on:

  • Whether you are using cost of sales accounting
  • The product is stock tracked or non-stock tracked

Here are two example accounting journals created when a purchase invoice is received:

Where inventory will be accounted for, i.e. it's a stock tracked product and cost of sales accounting is on.

Where inventory accounting is not required, e.g. it's a non-stock tracked product or cost of sales accounting is switched off.

The first nominal codes (creditors and purchase tax) are used whether cost of sales accounting is on or off and for journals relating to stock tracked and non-stock tracked products:

Creditors control account

The entry made to this account is the total of the invoice; the amount owed to the supplier. It will always be the Creditor Control Account 2100 and it cannot be changed. The amount posted will be added to the supplier account balance to be paid. Where a payment has already been made to the supplier against the original order, the two will automatically be matched together and cleared from the account (matched by both journals containing the same order and invoice references).

Purchase tax control account

This nominal code is used by default and cannot be changed. The amount of tax posted is calculated based on the tax codes used on the order, which can be seen in the Tax Code column. A different code can be applied to each line of an order if required; each different tax code used will display as a separate line in the journal. The tax codes displayed here are used to ensure the figures display in the correct place on tax reports and VAT returns.

The final account used when cost of sales accounting is ON:

For a STOCK-TRACKED product: Stock received not invoiced account (asset account)

When you are accounting for inventory the inventory value is only posted to the stock account when it is received, not when the invoice is received. Until the inventory is received this interim account is used. When the inventory is received this entry will be reversed and posted into the stock asset account.

To clarify the reason for this, take the scenario where the inventory is received before the invoice. The inventory value is posted to the stock asset account at the point the inventory is received. If the stock asset account was then also used in the invoice journal the inventory value would be duplicated.

For a NON-STOCK TRACKED product: Purchases account

Non-stock tracked items have no inventory value and so the accounting is posted directly to your purchases account. The nominal code used is the purchase code assigned to the product record, however, a code set against the supplier record would take precedence.

The final account used when cost of sales accounting is OFF:

For a STOCK-TRACKED product: Purchases account

Even if you are tracking inventory, with cost of sales switched off you won't see any asset accounts used throughout the accounting posted for purchases. The nominal codes used is the purchase code assigned to the product record, however, a code set against the supplier record would take precedence.

Remember you will need to post a manual journal to account for cost of sales when cost of sales is switched off.

For a NON-STOCK TRACKED product: Purchases account

Non-stock tracked items have no inventory value and so the accounting is posted directly to your purchases account.

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

Receiving inventory (JJ journal)

Inventory can be received before or after the invoice has been received and can only be done when there are stock tracked items on the order.

If cost of sales accounting is switched off no accounting journal is created by receiving inventory. This is an example of a journal created when cost of sales is switched on:

Stock

The stock account is the asset account where the inventory value is accumulated. The nominal code used is set directly against the product. The purchase settings can ensure an asset account is always used to prevent mispostings. The amount posted is calculated from the product cost price times the number of items received.

Stock received not invoiced

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 also uses this nominal code since the inventory value is not recognized when the invoiced, only when the inventory is received. The invoice will debit this account and receiving the inventory will reverse it with a credit.

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 realize 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.

Example

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

What accounting entries are made...?

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.

Making payment (PP journal)

When a payment is receipted against an order or invoice the accounting is automatically posted as follows:

Bank account

The bank account used is selected at the time the payment is receipted in Brightpearl. The amount posted depends on how much was received from the customer and does not have to match exactly to the total invoice amount.

Debtors control account

This account is always used and cannot be changed since the invoice amount will (recording how much the customer owes) will also be posted to this account; this entry will reduce how much the customer owes and reduce the customer account balance.

Adjustments

Additional entries will be seen for over payments for small balance write-offs, the nominal code is selected at the point of receipting the payment and creating the adjustment.

Nominal code rules

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.

Tax code rules

The tax code is assigned to each line of an order.

UK
The code used will come from the supplier record (if it exists).
If there is no code assigned to the supplier record then the product tax code is used.
The tax code can be manually selected against each line item directly on the order.
USA
If the supplier is set as taxable then the default company tax code will be applied.
If the supplier is set as non-taxable then the tax code will be "- Not rated".
If the supplier has no tax setting then Brightpearl will use the setting on the product. A product set as taxable will use the company default tax code and "- Not rated" when set as non-taxable.
The tax code can be manually selected against each line item directly on the order.

Purchase credits

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 recognize any returned stock items:

Allocating on-account payments/credits to orders (PP journal)

Allocating will match on-account payments, credits and invoices against one another so that they are no longer considered outstanding. Allocating doesn't change the supplier account balance. Allocation works by placing the relevant reference against the amount in the journal. When you ask Brightpearl to match an on-account payment with an invoice it will post this journal in order to put the invoice reference against the payment, therefore matching them together:

When an on-account credit is allocated to an invoice this type of journal will be posted: