Purchase Invoice is the exact opposite of your Sales Invoice. It is the bill that your Supplier sends you for products or services delivered. Here you accrue expenses to your Supplier. Making a Purchase Invoice is very similar to making a Purchase Order.
To make a new Purchase Invoice:
type "new purchase invoice" into the search bar then select "New Purchase Invoice" from the drop down
or click on “Make Purchase Invoice” in Purchase Order or Purchase Receipt.
You can also create a Purchase Invoice from:
Accounts > Billing > Purchase Invoice > New Purchase Invoice
The concept of “Posting Date” is again same as Sales Invoice. “Bill No” and “Bill Date” helps to track the bill number as set by your Supplier for reference.
Is Paid option
The Is Paid checkbox should be checked if there is a part or full payment on the invoice at posting date.
The Update Stock checkbox should be checked if you want ERPNext to automatically update your inventory. Consequently, there will be no need for a Delivery Note.
Like in Sales Invoice, you have to enter an Expense or an Asset account for each row in your Items table. This helps to indicate if the Item is an Asset or an Expense. You must also enter a Cost Center. These can also be set in the Item master.
The Purchase Invoice will affect your accounts as follows:
Accounting entries (GL Entry) for a typical double entry “purchase”:
- Expense or Asset (net totals, excluding taxes)
- Taxes (/assets if VAT-type or expense again).
Accounting Treatment When Is Paid is checked
If Is Paid is checked, ERPNext will also make the following accounting entries:
Credits: * Bank/Cash Account
To see entries in your Purchase Invoice after you “Submit”, click on “View Ledger”.
Is purchase an “Expense” or an “Asset”?
If the Item is consumed immediately on purchase, or if it is a service, then the purchase becomes an “Expense”. For example, a telephone bill or travel bill is an “Expense” - it is already consumed.
For inventory Items, that have a value, these purchases are not yet “Expense”, because they still have a value while they remain in your stock. They are “Assets”. If they are raw-materials (used in a process), they will become “Expense” the moment they are consumed in the process. If they are to be sold to a Customer, they become “Expense” when you ship them to the Customer.
Deducting Taxes at Source
In many countries, the law may require you to deduct taxes, while paying your suppliers. These taxes could be based on a standard rate. Under these type of schemes, typically if a Supplier crosses a certain threshold of payment, and if the type of product is taxable, you may have to deduct some tax (which you pay back to your government, on your Supplier’s behalf).
To do this, you will have to make a new Tax Account under “Tax Liabilities” or similar and credit this Account by the percent you are bound to deduct for every transaction.
For more help, please contact your Accountant!