After following the process of Purchase Order→Purchase Receipt→Purchase Invoice, it is desired that the Expense account is debited at purchase invoice level. However only the “Stock received but not billed” is debited and no entry is passed to expense account (P&L).
We found that expense GL gets impacted only after submitting delivery note (i.e after the goods are sold). Which means that say as on 31st march if I have purchased goods of 10 lakhs but not delivered/sold them, then this amount will not show in expenses and not hit the profit and loss account and hence will not show correct profitability.
Do we have any workaround for this?
From an accounting perspective, goods bought is an asset in the balance sheet and not an expense in the Profit and Loss account.
Expense Account can only be debited for the cost of goods sold when the goods are actually—sold.
The only exception to this is if the products been bought is not a stock item (you uncheck maintain stock in the item master). In this case the cost of the item will be debited directly to Cost of goods sold account when you make the purchase.
Regards
Thanks Olamide! Will run this through with our accounting community here to see if it fits in their accounting policies.
Hi Olamide, Checked with multiple accounting professionals and got the same reply that we here in India follow purchase based accounting wherein Purchases are booked as expenses at Purchase Invoice Level.
Seems I may have to customize this so as to hit the expense GL at purchase invoice level.