| Transaction Type | Amount | Debit (Dr) | Credit (Cr) | Notes |
|---|---|---|---|---|
| Purchase Order | $1,000 | None | None | Its an order entry. There is no financial impact. |
| Purchase Order Receipt | $1,000 | Inventory | GRNI | |
| Vendor Invoice | $1,150 | GRNI + Taxes + Freight - Discounts + Rounding | Accounts Payable | |
| GRNI | $1,000 | GRNI | ||
| Tax (e.g., VAT) | $100 | Tax Receivable | ||
| Freight | $50 | Freight Charges | ||
| Discount | $-20 | Purchase Discounts | ||
| Rounding Difference | $20 | Rounding Adjustment | ||
| Vendor Payment | $1,150 | Accounts Payable | Bank |
* GRNI stands for Goods Receipt Not Invoiced. It acts as a temporary liability when goods are received but the invoice hasn't yet arrived.
* Payments should match the Accounts Payable exactly — this avoids overpayments and keeps reconciliations clean.
* Tax is triggered only when an invoice is received and legally recognized.
* Freight costs are usually included on the vendor invoice, not during goods receipt.
* Discounts relate to payment timing or invoice terms, not receiving goods.
* Rounding arises during amount calculations at invoicing or payment not during quantity-based receipts.
| Account Type | Increase With | Decrease With |
|---|---|---|
| Asset | Debit | Credit |
| Liability | Credit | Debit |
| Equity | Credit | Debit |
| Revenue | Credit | Debit |
| Expense | Debit | Credit |