Registering a purchase!

Your enterprise will also need to spend money. You will buy goods and services and also pay for various other overheads involved in running a business. Whatever the type of expenditure a purchase record needs to be generated.

If the purchase is “on account” a purchase invoice or payment demand will be provided by the supplier. If you have paid in advance you should still be provided with an invoice (you may well already possess a pro-forma invoice). If its a ‘cash’ transaction then you will likely have at least a receipt.

Source purchase documents (as mentioned above) are needed to verify your costs and an appropriate purchase-row needs to exist in your account records. Create a row for a purchase invoice with the entries as identified here. Not every column for the row requires a value at this stage and the unused ones are left blank for the moment.

Example

Hazeltine Cartons produce some packaging boxes for you. Their charge is £378 net and their purchase invoice to you is dated 19th April and referenced 904/TG (this is the reference on their invoice).

* The gross value will equal net value plus VAT value.

* VAT-X is calculated as the negative value of the VAT value.

* It is assumed that VAT is dealt with on an ‘invoice’ basis. So ‘Qtr.’ is set to denote that the current VAT quarter applies. A straightforward incremental basis of numbering quarters is adopted here and this case is for your very first quarter.

* If you deal with VAT on a ‘cash’ basis, then ‘Qtr.’ is left blank at this initiation stage.

* BS# is set to the code to identify the “supplier creditors” account (say 5:SC). This setting signifies that the payment is still to be made by you.

* P&L# is set to identify the “packaging” P&L account (say 514).