Invoice Approval and Data Processing

Invoice Approval and Data Processing:

By the time materials reach the receiving department, the company unusually will have received the invoice from the vendor.

This invoice and a copy of the purchase order are filled in the accounting department. When the receiving report with its inspection reports arrives, the receiving report and the invoice are compared to see that materials received meet purchase order specifications as to items, quantities, price extensions, discount and credit terms, shipping instruction, and other possible conditions. I the invoice is found to be correct or has been adjusted because of rejects as noted by the inspection department, the invoice clerk approves it, attaches it to the purchase order and the receiving report, and sends these papers to another clerk for the preparation of the voucher.

Invoice approval is an important step in materials control procedure, since it certifies that the goods have been received as ordered and the payment can be made. The invoice approval information is often built into a rubber stamp and each invoice is stamped.

The verification procedure is handed by responsible invoice clerks, thus assuring systematic examination and handling of the paper work necessary for adequate control of materials purchases. The preparation of the voucher is based on the information taken from the invoice approval stamp.

The voucher data are entered first in the purchases journal and are posted to the subsidiary records. They are then entered in the cash payments journal according to the due date for payment. The original voucher and two copies are sent to the treasurer for issuance of the check. The treasurer mails the check with the original voucher to the vendor, files a voucher copy, and returns one voucher copy to the accounting department for the vendors file. Purchase transactions entered in the purchases journal affect the control accounts and the subsidiary records as shown in the chart below:

Transaction General Ledger Control Subsidiary Records
Debit Credit
Materials purchased for stock Materials Accounts Payable Entry in the received section in the materials ledger card
Materials purchased for a particular job or department Work in process Accounts Payable Entry in the direct materials section of the production or the job order
Materials and supplies purchased for factory overhead purposes Materials Accounts Payable Entry in the received section of the materials ledger card
Supplies purchased for marketing and administrative office Materials Marketing expenses control Administrative expenses control Accounts Payable Entry in the received section of the materials ledger card or in the proper columns of the marketing or administrative expenses analysis sheets
Purchases of services or repairs Factory Overhead
Marketing expenses control
Administrative expenses control
Accounts Payable Entry in the proper account columns of the expenses analysis sheet
Purchase of equipment Equipment Accounts Payable Entry on the equipment ledger card

You may also be interested in other useful articles from “controlling and costing materials” chapter:

  1. Purchases of productive material
  2. Purchases of supplies, services, and repairs
  3. Materials purchasing forms
  4. Receiving materials
  5. Invoice approval and data processing
  6. Correcting invoices
  7. Electronic data processing (EDP)  for materials received and issued
  8. Cost of acquiring materials
  9. Storage and use of materials
  10. Issuing and costing materials into production
  11. Materials ledger card – perpetual inventory
  12. First-in-First-Out (FIFO) Costing Method
  13. Average Costing Method
  14. Last-in-First-Out (LIFO) Costing Method
  15. Other Methods-Month end average cost, last purchase price or market price at date of issue, and standard cost
  16. Inventory valuation at cost or market whichever is lower
  17. American Institute of Certified Public Accountant (AICPA) cost or market rules
  18. Adjustments for departures from the costing method used
  19. Inventory pricing and interim financial reporting
  20. Transfer of materials cost to finished production
  21. Physical inventory
  22. Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts
  23. Scrap and waste
  24. Spoiled goods
  25. Defective work
  26. Discussion Questions and Answers about Controlling and Costing Materials


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