Vendor Invoice Verification Accounting Entries

VENDOR INVOICE VERIFICATION

The detail process related to invoice verification is documented in Materials Management Document.

On receipt of vendor bill the following entry will be passed:

  GR/IR Account     DR

  Freight Clearing Account   DR

  Cenvat Clearing Account   DR

  Vendor Account    CR

Invoice Verification for Foreign Vendor 

On receipt of vendor bill the following entry will be passed:

  GR/IR Account      DR

  Vendor Account     CR

Invoice Verification for Custom vendor

On receipt of Vendor bill the follo wing entry will be passed:

1)  RG 23A/RG 23C Part 2 A/c (CVD) A/c  DR

     Cenvat Clearing A/c     CR

2)  G/R I/R A/c     DR

     Cenvat Clearing A/c    DR

     Vendor A/c                          CR

3)  Cost of Material A/c    DR

     Vendor A/c (Customs)   CR

Invoice Verification for Freight / Clearing Agent

  Cost of Material A/c    DR

  Vendor A/c (Clearing Agent)  CR

Invoice Verification for Octroi Expenses

   Cost of Material    DR

   Vendor A/c (Octroi)    CR

TDS (Work Contract Tax) for Service Orders shall be calculated and deducted accordingly. 

The following entry will be passed on bill passing:

  Expenses Account    DR

  Vendor Account     CR

  TDS Account    CR

The material shall be returned to the vendor using the 

  Return to vendor movement type in SAP

  Creating a Return PO 

These transactions will be processed in the MM module.

The accounting entries will be :

Returns after GRN

  GR/IR A/c   Dr

  Stock A/c   Cr

The accounting in respect of debit / credit memos for FI vendors, the process will be similar to that of invoice processing.  The accounting entries will be:

  On issue of debit note

  Vendor Account    DR

  Expenses Account   CR

In respect of import vendor - capital goods exchange differences are to be accounted manually through a Journal Voucher for capitalization. 

Exchange rate differences will be accounted at HO. An example of the accounting entry in this case shall be:

Invoice entry @ 40 INR: 1 USD 

  Asset / Expense A/c   DR  100 

  Vendor A/c    CR  100 

Payment Entry @ 41 INR: 1 USD 

  Vendor A/c    DR  100 

  Bank A/c    CR  110 

  Exchange rate loss Capital A/c DR    10 

  Asset A/c    DR   10

  Exchange rate loss Capital A/c     CR   10

A new G/L account shall be created for the special G/L transactions. 

The accounting entry for making the down payment shall be:

  Advance to supplier  account    Debit

  Bank A/c      Credit 

When the invoice is booked the following entry is passed

  GR/IR account      Debit 

  Vendor account     Credit 

  Clearing of Invoice against Down Payment

  Vendor A/c       Debit 

  Vendor down payment account   Credit 

Wherever, TDS is applicable, the TDS will be deducted at the time of down-payment to the vendor. 

Down Payment for Capital (tangible) Assets

Down payment to vendors for capital acquisitions is to be reported separately in the Balance Sheet under the head Capital Work in Progress.   Hence down payment for capital goods would be tracked through a separate special general ledger indicator. 

The procedure to be followed is:

Definition of alternative reconciliation accounts for Accounts Payable for posting down payments made for Capital assets

Clearing the down payment in Accounts Payable with the closing invoice.

A new G/L account shall be created for the special G/L transactions. 

The accounting entry for making the down payment shall be:

Vendor Advance for Capital Goods Account Debit 

  Bank A/c      Credit 

When the invoice is booked the following entry is passed

  Asset A/c /  Asset WIP    Debit 

  Vendor A/c      Credit 

Clearing of Invoice against Down Payment

  Vendor A/c       Debit 

  Vendor Advance for Capital Goods Account Credit

The Following are the TDS Rates (to be confirmed with the recent changes)

  Particulars Tax Rate Surcharge Rate Total

  Contractors – 194 C 2% 5% 2.10%

  Advertising – 194 C 1% 5% 1.05%

  Prof. Fees – 194 J 5% 5% 5.25%

  Rent – Others – 194 I 15% 5% 15.75%

  Rent – Company – 194 I 20% 5% 21%

  Commission – 194H 5% 5% 5.25%

  Interest  - Others – 194 A 10% 5% 10.50%

  Interest – Company – 194 A 20% 5% 21%

  Special Concessional Tax 

  Works Contract Tax 

SECURITY DEPOSITS /EARNEST MONEY DEPOSIT RECEIVED FROM  VENDORS 

  Bank A/c                              DR

  Security Deposit Vendor   CR

EMD to give the age so as to enable the same to be transferred to unclaimed EMD account.

PAYMENT OF TOUR ADVANCE DOMESTIC TOURS

Employee Advances will be paid by the Accounts Department unit wise based on the requisition or recommendation of the respective departmental head. 

  Employee Travel Advance A/c  DR 

  Cash / Bank Account   CR