| Step | Document Name & Description | Item Example | Stakeholder | Debit (GL Type & Description, Reason for ↑/↓) | Credit (GL Type & Description, Reason for ↑/↓) | Debit Amount (↑/↓) | Credit Amount (↑/↓) |
|---|---|---|---|---|---|---|---|
| 1. Purchase Requisition Creation | Purchase Requisition Form | Shipping services request | Procurement Dept. | Inventory (BS: Asset, ↑ for adding service) | Accounts Payable (BS: Liability, ↑ for obligation) | $10,000 (↑) | $10,000 (↑) |
| 2. Purchase Order Issuance | Purchase Order | Pallets of consumer electronics | Finance Dept. | Inventory (BS: Asset, ↑ for adding goods) | Cash/Bank (BS: Asset, ↓ for payment) | $30,000 (↑) | $30,000 (↓) |
| 3. Receiving & Inspection | Goods Receipt Note | Delivery of electronics to retailers | Warehouse Dept. | Inventory (BS: Asset, ↑ for acceptance) | Accrued Expenses (BS: Liability, ↓ as settled) | $15,000 (↑) | $15,000 (↓) |
| 4. Invoice Approval & Payment | Vendor Invoice | Fuel for transportation | Accounts Payable | Expenses (P&L: Expense, ↑ for cost) | Cash/Bank (BS: Asset, ↓ for payment) | $5,000 (↑) | $5,000 (↓) |
| 5. Payment Processing | Payment Voucher | Customs duties for imported goods | Treasury Dept. | Tax Payable (BS: Liability, ↑ for due tax) | Cash/Bank (BS: Asset, ↓ for payment) | $2,000 (↑) | $2,000 (↓) |
Legend: BS = Balance Sheet, P&L = Profit & Loss
Notes:
- Step 1: The procurement department creates a purchase requisition for shipping services. This increases the inventory account as a future asset and simultaneously raises the accounts payable, indicating an obligation to pay.
- Step 2: When the purchase order is issued, the inventory is further increased by the addition of consumer electronics, and the cash or bank balance is decreased due to payment.
- Step 3: Upon receiving and inspecting the goods, the inventory is adjusted to reflect the received goods, and accrued expenses are decreased as these expenses are now settled.
- Step 4: The invoice for fuel costs increases the expense account, impacting the Profit & Loss statement, and decreases the cash/bank balance as the payment is made.
- Step 5: Payment processing for duties on imported goods increases the tax payable account while decreasing cash/bank balances for the payment made.
This table provides a realistic overview of the financial transactions in each stage of the purchase cycle in a transportation and logistics organization, highlighting the movement in inventory and accounts receivable/payable with relevant examples from the industry.
Leave a reply