Accounting in Purchasing

Question

Hi,
What are the accounts will be hit..when we receive a item through PO?
Inventory AP accrual account...this will be debited
Material valuation account...this will be credited ???
can someone also share as when and what case invoice and purchase price variance..willl be hit?
Thanks
Mahendra

Answer 1

Purchase Price Variance Account:
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This is the account used to accumulate purchase price variance for this organization. The purchase price variance account is usually an expense account. This is the variance that you record at the time you receive an item in inventory, and is the difference between the purchase order cost and an item's standard cost. Purchasing calculates purchase price variance as:
PPV = (PO unit price - standard unit cost) X quantity received
You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form
Invoice Price Variance Account:
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This is the account used to accumulate invoice price variance for this organization. This is usually an expense account. Invoice price variance is the difference between the purchase order price for an inventory item and the actual invoice price multiplied by the quantity invoiced:
Invoice Quantity x (Invoice Price - PO Price) x Invoice Exchange Rate. Purchasing uses this account on the PO distribution when the requisition or purchase order is created. When Payables creates accounting entries for the invoice, it uses the invoice price variance account from the purchase order to record invoice price variance entries. You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form.