Today we will talk about the purchase component of your Accounting software, which I basically think of as a mirror image of your sale or invoice component. From a technical perspective it is exactly that ¢â‚¬" an exact duplicate when an invoice creates a debit the purchase created a credit and vice verse ¢â‚¬" that¢â‚¬â„¢s pretty much it from a bookkeeping perspective.
To be honest in my business I don¢â‚¬â„¢t do a lot of purchasing, that is to say, I don¢â‚¬â„¢t buy things in credit and I definitely don¢â‚¬â„¢t hold any stock. So in my company¢â‚¬â„¢s book this section is never used.
I will also admit a little confusion when using these terms, at first I thought a purchase was a purchase order, but it is actually a supplier invoice.  Let¢â‚¬â„¢s look at the terms:
Purchase Order: ¢â‚¬Å“A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. ...¢â‚¬Â
Invoice/Bill: ¢â‚¬Å“An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. ..¢â‚¬Â
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So when you¢â‚¬â„¢re entering your purchases into the purchase records you¢â‚¬â„¢re actually recording your supplier bills. Hope this is clear.
Nevertheless let¢â‚¬â„¢s try and make a few comments on the purchase:
a.This is kind of the opposite of an invoice, actually your record a purchase or payment for an invoice your receive from the supplier
b.You¢â‚¬â„¢re the customer!
c.You need to enter similar details about supplier, the item you purchase and GST
d.You can also print, email and view or edit this form.
When you create a purchase and enter the details for the supplier, address, dates and line items for each item or service purchased (the account selected should usually be an Asset account or an Expense type account) the system will record the following:
¢â‚¬¢GST amounts are debited to the GST Paid account
¢â‚¬¢Item price is debited to the Asset/Expense account
¢â‚¬¢GST + Item amounts are credited to the Account Payable account
As with invoices you can keep track of your accounts payable using the Analysis screen as well as use various reports to show the details of all open or closed purchases.
That¢â‚¬â„¢s it for this week, next week receiving money, yippee.
What is this about?
Nominal Accounting is all about making bookkeeping simple, we created Nominal to provide a simple solution for Australian Micro Businesses. In this newsletter/blog we're going to cover different aspects of business bookeeping and to try and provide a some 'lessons' or tips on how to go aboutdoing some of these simple tasks.
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