When you receive a shipment of inventory items, aACE processes the receipt of goods to make the items available for outgoing orders. However, in most cases the vendor's invoice has not yet been processed to accurately allocate the payment liability in Accounts Payable. In order to properly reflect the value of the inventory that has been received but not yet paid for, aACE makes an entry to a liability account in the general ledger called Accrued Inventory.
Let's follow a transaction through the system. In this example, let's say that we have place a purchase order for 100 gadgets at $8 each.
An entry is made to Inventory that shows we have 100 gadgets on order. Zero have been purchased and zero have been received. Right now we have zero liability because no gadgets have been received as of yet.
Let's say that a partial shipment of 10 gadgets just arrived. Once the incoming shipment is processed, aACE shows we have received 10 units (an asset worth $80). Current inventory shows we have 10 units because no outgoing orders have been processed. And, zero units have been purchased because we've not yet received the invoice from the vendor. In order to accurately reflect the liability, Accrued Inventory will carry a value of $80 as shown under the Unpurchased Inventory tab.
Process Vendor Invoice
Now let's say we received the vendor's invoice and have processed the purchase record in aACE. This action removes the liability from Accrued Inventory and places it in the Accounts Payable liability account.
The Accounts Payable now shows the liability.
Final Inventory Transactions
Below is a list a the final inventory transactions for this example. You can see we have 10 gadgets in actual inventory and 90 showing as Estimated (on order).