1. Accounting Entries for Procure to Pay (P2P)
cycle
Accounting Entries for Procure to Pay (P2P) cycle is as follows:
Purchasing/PO module:
Event Accounting Entries
1. Creation of Requisition No accounting entries
2. Creation of Purchase Order (PO) No accounting entries
Inventory Destination Receipts
3. Receipt of Inventory
Items Receiving Inspection A/c Dr
Inventory AP Accrual A/c Cr
Note: Accounting Entries for Inventory Items can be created at Receipts only where as for
Expense Items it can be done at Period End OR Receipts as applicable.
Expense Destination Receipts
4. Receipt of Expense
Items Receiving Inspection A/c Dr
Expense AP Accrual A/c Cr
Expense Items with Receipts at Period End
5. When Receipts at Period End set up is done for Expense items,
PO Charge A/c
To Expense AP Accrual A/c Cr
6. When next PO period is opened, reversal entry for point 7 is created,
Expense AP Accrual A/c
To PO Charge A/c Cr
Inventory module:
Event Accounting Entries
1. Delivery of Inventory
Items Material/Inventory A/c Dr
(Standard Cost)
To Receiving Inspection A/c Cr (PO Price)
Purchase Price Variance A/c Dr/Cr# (as applicable)
#Purchase Price Variance (PPV) is the difference between PO price and Standard Cost.

2. 2. Delivery of Expense
Items PO Distribution Charge A/c Dr
To Receiving Inspection A/c Cr
3. Purchase Return Inventory AP Accrual A/c Dr
To Inventory A/c Cr
Payables/AP module:
Event Accounting Entries
1. Creation of
Inventory Item Invoice Inventory AP Accrual A/c Dr
To Liability A/c Cr
Invoice Price Variance* A/c Dr/Cr (if any)
* Invoice Price Variance=Invoice Price-PO Price
2. Creation of
Expense Item Invoice Expense AP Accrual A/c Dr
To Liability A/c Cr
3. Payment of Invoice (Inventory/Exp)
Liability A/c Dr
To Cash Clearing* A/c Cr
To Discount A/c Cr (If any)
To Gain/Loss A/c Cr (Foreign Exchange G/L if any)
* Cash Clearing is used where Cash Management module is in place else it will directly hit
Cash/Bank Account for payment.
Other Entries:
4. Good return to
Supplier Liability A/c Dr
To Inventory/Expense AP Accrual A/c Cr
5. Refund through
Credit Memo Liability A/c Dr
To AP Accrual/Charge A/c Cr
6. Creation of Prepayment Invoice Prepaid
Expense A/c Dr
To Liability A/c Cr
7. Payment of
Prepayment Invoice Liability A/c Dr
To Cash Clearing A/c Cr
8. Apply prepayment with
Standard Invoice Liability A/c Dr
To Prepayment A/c Cr
9. Creation of

3. Credit Memo Liability A/c Dr
To AP Accrual A/c/ Expense A/c Cr