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Journal Entries for 2 Way Match

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For two way match with a purchase order:

1. Purchase order created (No financial impact of JE)
2. Invoice is received and applied
DR to Expense
CR to Accounts Payable
3. Payment made:
DR Accounts Payable
CR Cash
4. Any open POs at the end of the month that don't have invoices received are accrued under accrued expenses.

Could someone tell me if the above is correct?
If it is a two way match, why does it need to go DR expense and CR AP. Can it not go DR Expense and CR Cash straight away? Or will step 3 only happen when the payment run is processed (in this example once a week on Friday)

Thanks for your help.

Answers

Victor Shah
Title: Account Manager
Company: FlowRocket, LLC
(Account Manager, FlowRocket, LLC) |

Interpreting your question, you only have a 2 way match system, i.e. there is no Goods Receipt Note (GRN) or there is no Goods receipt confirmation in the system.

In the absence of a 3 way Goods receipt confirmation system, the steps that you have mentioned are the best possible practice.

The only thing you may have to consider step 2. You will have to confirm when the liability need to be transferred on your account. Is it when you receive the Goods or when you receive the invoice?

Otherwise, the 4 steps you mentioned are the best practice.

Steve Sheridan
Title: Associate
Company: Dean Lewis Associates
(Associate, Dean Lewis Associates) |

It appears that your cash balance would be off if you credit that account upon receiving an invoice. You do need to wait for step 3 because of this.

Victor Shah
Title: Account Manager
Company: FlowRocket, LLC
(Account Manager, FlowRocket, LLC) |

He is only recording to the cash, when he is making the payment in step 3. The cash account is not being affected until the step 3 of payment.

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