12.4 Accounts Payable Steps and Ledger Impact

The payables path, and two topics this exam skips

Accounts payable is the ledger record of what the company still owes vendors. The transactions that build it are a purchase order, an item receipt when you receive before you bill, a vendor bill, and a vendor payment. This section follows that path and the general-ledger effect of each step, including what happens when the bill price differs from the receipt.

Blanket purchase orders and 3-way match are outside this exam. The in-scope path is a non-posting purchase order, an item receipt when Advanced Receiving splits receipt from billing, and a vendor bill that creates the payable.

Purchase orders do not post

Enter a purchase order at Transactions > Purchases > Enter Purchase Orders. Help calls purchase orders non-posting: they do not post an amount to ledger accounts, and they have no accounting impact until you receive the order.

A non-posting purchase order has no posting period. Saving it does not credit accounts payable or debit inventory or an expense. When a vendor bill needs approval, Help sets the posting period once the bill is approved.

How Advanced Receiving changes the workflow

Enable Advanced Receiving at Setup > Company > Enable Features, on the Purchase Transactions subtab. The feature splits receiving from billing.

Without Advanced Receiving, receiving and billing are one step. When you receive the items, NetSuite creates the vendor bill at the same time. You do not get a separate item receipt that posts inventory days or weeks before the bill exists.

With Advanced Receiving, receive all or part of the order at Transactions > Purchases > Receive Orders. Save stops at the item receipt. Save and Bill also creates a vendor bill for what you received. Each receipt still has to be billed.

On receipt, on-hand quantity increases and the inventory value goes into Accrued Purchases. The purchase shows on vendor and purchase reports and stays off the Open Bills report until it is billed. Payment then settles the payable.

A $500 receipt billed at $500

Use one inventory purchase so the payable is easy to see. The purchase order is for inventory with a $500 value. It posts nothing.

The shipment arrives and, with Advanced Receiving on, you save an item receipt. Help's general-ledger topic posts that receipt as a debit to Inventory Asset and a credit to Accrued Purchases. The $500 receipt uses that pattern:

• Debit Inventory Asset $500.
• Credit Accrued Purchases $500.

Inventory on hand is higher. Accrued Purchases, not accounts payable, holds the amount you expect to be billed. The Open Bills report still does not list this purchase, because no bill exists yet.

The vendor's invoice arrives for the same $500 and you create the vendor bill from the receipt. The bill posts:

• Debit Accrued Purchases $500.
• Credit Accounts Payable $500.

Accrued Purchases returns to zero for this receipt. Accounts payable increases by $500. That $500 is the amount you owe. The bill can now appear as an open bill.

A standalone expense bill, with no receipt, debits the expense and credits accounts payable when it posts. Advanced Receiving inserts the item receipt and Accrued Purchases before that payable when you receive inventory first.

Help notes that Advanced Receiving receipts can also post to other ledger accounts. The standard inventory receipt still debits Inventory Asset and credits Accrued Purchases, not accounts payable.

When the bill price differs from the receipt

Receiving at one price and billing at another leaves Accrued Purchases uneven. Keep the receipt at $500, and suppose the vendor bill is entered at $560 after the items were received.

The receipt journal does not get rewritten. It still debits Inventory Asset $500 and credits Accrued Purchases $500.

The vendor bill uses the billed amount:

• Debit Accrued Purchases $560.
• Credit Accounts Payable $560.

Accounts payable is $560, because that is what the vendor asked to be paid. Accrued Purchases was credited $500 by the receipt and debited $560 by the bill. The difference is $560 minus $500, which equals $60. That $60 remains in Accrued Purchases.

Quantity, price, and exchange-rate differences can leave a remaining value in Accrued Purchases. With Advanced Receiving, Post Vendor Bill Variances, at Transactions > Payables > Post Vendor Bill Variances, posts those differences, and the bill must be linked to the receipt. A unit-cost difference uses the item's Bill Price Variances account, which Help also calls the Price Variance Account. Changing the bill price changes the payable and the amount removed from Accrued Purchases. It does not replace the $500 inventory debit the receipt already posted.

Which bill status affects accounts payable

Standard vendor bill approval is what decides the ledger impact. You approve a bill in Edit mode, not View mode. The default approval status can be Pending Approval or Approved, and bills default to Approved unless an administrator changes that default.

Help's Vendor Bill Approvals table separates the accounting result by status:

• Pending Approval has no accounting impact on accounts payable or the asset. A standalone bill in this status also has no inventory impact. The line still counts toward the outstanding bill quantity on the purchase order.
• Rejected has no accounting impact and does not count toward that outstanding quantity.
• Approved has accounting impact on accounts payable and the asset, and it counts toward the outstanding quantity.

An approved bill that has not been paid is the Open bill. It appears on the Open Bills report, and its credit to accounts payable is the amount you owe. The October 2024 foundation sample identifies Open as the status that affects accounts payable. Pending Approval does not post. Partially Billed is purchase-order progress, not the vendor-bill status that creates the payable. Unpaid describes the balance. The status name for that approved unpaid bill is Open.

A $500 bill saved as Pending Approval does not increase accounts payable. The payable appears when the bill is approved and stands as Open. Approval needs the Vendor Bill Approval, Bills, and Find Transaction permissions. After one bill is entered against purchase-order items, another bill cannot be entered against those same items until the first bill is processed or canceled.

The vendor payment

Pay an open bill at Pay Bills, or pay a single vendor from the vendor payment page. Help's general-ledger example posts the payment as a debit to Accounts Payable and a credit to Checking. For the $500 open bill:

• Debit Accounts Payable $500.
• Credit Checking $500.

The payable is gone. The payment does not debit inventory or the expense again, because the receipt or the bill already recorded the cost. If the company uses accounts payable, pay with Pay Bills. Help reserves Write Checks for paying vendor bills only when accounts payable is not in use.

A $560 bill is settled by a $560 payment. The $60 receipt difference stays a variance in Accrued Purchases, not a second payable.

Posting effect of each step

Practice the receipt, the open bill, and the payment on the Oracle NetSuite Foundation practice questions.