Sage MAS 90 or MAS200 – Managing the Purchases Clearing Account in the Purchase Order Module

MAS90, MAS200 Clients First Business Solutions What is the Purchases Clearing Account? 

The Purchases Clearing Account is a holding account that appears on your balance sheet as a liability.  It is intended to show the amount of inventory that has been received but not yet invoiced, or invoiced and not yet received.  More simply, it shows the value of goods that were received with Receipt Of Goods, which are still waiting for the bill from the vendor to arrive.

How and When are posting made to the Purchases Clearing Account?

Action
Effect

Receipt of Goods without an Invoice
Credit to Purchases Clearing

Receipt of Invoice
Debit to Purchases Clearing

Return of Goods without an Invoice
Debit to Purchases Clearing

Receipt of Negative Invoice for Goods Returned
Credit to Purchases Clearing

Receipt of Inventory in Inventory Transaction Entry
Credit to Purchases Clearing

Receipt of Goods and Invoice at the same time
No Posting to Purchases Clearing

Return of Goods and Negative Invoice at the same time
No Posting to Purchases Clearing

Theoretically, the amount that appears on the Purchases Clearing by Items Only Report  (located on the Purchase Order Period End Menu in Purchases Clearing Reports) should match the amount that is in the General Ledger Purchases Clearing Account. 

When should the Purchases Clearing Account be Reconciled?

Prior to period end processing, it is recommended you balance the Purchase Order module to the General Ledger Purchases Clearing  accounts.  Use the Purchases Clearing Report by Item Only report, found on the Purchase Order Period End menu, Purchases Clearing Reports, and reconcile to your General Ledger Trial Balance report.

Purchases Clearing by Item Only – Prints all inventory items with quantities on purchase orders included in the purchases clearing amount.  Use the total of this report to reconcile your Purchases Clearing account balance with the G/L Purchases Clearing account.

Purchases Clearing by Product Line – prints the same information as the Purchases Clearing by Item Only report, but sorted by Product Line.

Purchases Clearing Items, Special and Misc – Prints all inventory items, special (*) items and miscellaneous (/) items with quantities on purchase orders included in the purchases clearing amount.  This report will not balance to the General Ledger Purchases Clearing account because the Special and Misc items are not posted to Purchases Clearing.

Purchases Clearing Special and Misc Only – Prints only special and miscellaneous items with quantities on purchase order.  The total on this report is not included in the G/L purchases clearing accounts.

Purchases Clearing in Open PO Format – Prints the total purchases clearing amount and the total purchases clearing plus special and miscellaneous items amount.  If printed for all orders, the total purchases clearing amount should agree with the Purchases Clearing account balance.

What if the G/L account and Purchases Clearing by Item Only do not match?

If the two amounts do not balance, try the following steps to reconcile Purchases Clearing:

  1. Review the Purchases Clearing by Item Only report, and identify any items you know have been received and invoiced, but are not reflected as such on the report.

  2. If an invoice has been entered, but not reflected on the report, it may have been entered directly in Accounts payable, rather than in the Purchase order.  The invoiced needs to be entered in Purchase Order to affect Purchases Clearing.

  3. If you have returned items, but not invoiced for that return in the purchase order module, you need to enter a Receipt of Invoice with a negative quantity invoiced.

  4. If items have been received for the wrong purchase order, you will need to process a return of goods for the incorrect purchase order.  If the items were have been invoiced for the wrong purchase order, a negative quantity invoice through Receipt of Invoice.

  5. If the items have been received twice for the same purchase order, the second receipt of goods must be reversed using Return of Goods Entry.  If the items were invoiced twice, then reverse the invoice using Receipt of Invoice Entry.

What Causes the General Ledger Purchases Clearing Account and Purchases Clearing by Items Report to be out of balance?

Typically the out of balance situation occurs when one transaction (the receipt of goods) was made in the Purchase Order Module, but the other transaction (the receipt of invoice) was made in another module such as Accounts Payable.   For example:

  1. If you received the goods with Receipt of Goods, but you entered the Invoice in Accounts Payable Invoice Data Entry rather than with Purchase Order Receipt of Invoice you may cause an out of balance situation.  Invoices entered in Accounts Payable typically post to the inventory account – so the amount that was credited to the Purchases Clearing Account when Receipt of Goods was run will not have been reversed.  To correct this situation, enter the invoice in Purchase Order Receipt of Invoice.  Then do an invoice adjustment in Accounts Payable to adjust the duplicate invoice down to $0.00.
  2. If your have returned goods but not invoiced them in the Purchase Order Module, you may be out of balance.  In the Purchase Order module, do a Receipt of Invoice, show the quantity invoiced as a negative quantity.
  3. If you received goods in the Inventory Module using Inventory Transaction Entry, and you used Accounts Payable Invoice Data Entry, you may be out of balance. 

How can I make reconciling the Purchases Clearing Account easier?

If you use Receipt of Invoice you post to the same G/L date that was used when you did the Receipt of Goods, rather than using the date that the invoice was received, you will see the credit and the debit to the Purchases Clearing account occurring on the same day.  This may make it easier for you to reconcile the account.

If you have never reconciled your Purchases Clearing Account, it may be difficult to get it in balance.  However, if reconciled regularly at each month end, it will be easier to manage.

Posted by Mark Chinsky

 

Thanks to DSD Inc. for this post.

© 2009, Mark Chinsky. All rights reserved.

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