How to Configure and Reconcile the Purchase Clearing Account in Sage 100

The Purchase Clearing Account in Sage 100 is used to track the value of goods received but not yet invoiced by the vendor. This account bridges the timing gap between when goods are received (recognized in inventory) and when the vendor's invoice is recorded.

Here’s how it works:

  1. Goods Receipt: When goods are received, the Purchase Order module debits the inventory account and credits the Purchase Clearing account. At this point, you haven't received the invoice yet, so the vendor liability isn't recorded in Accounts Payable.

  2. Invoice Posting: Once the vendor invoice is received and processed, the system debits the Purchase Clearing account and credits Accounts Payable. This ensures that the Purchase Clearing account is cleared out, and the liability is appropriately recorded.

If there’s a mismatch between the quantities or prices on the purchase order and the invoice, adjustments might be necessary to keep the Purchase Clearing account accurate. It's also essential to regularly reconcile this account to avoid discrepancies.

To configure and reconcile the Purchase Clearing Account in Sage 100, follow these steps:

1. Configuration of the Purchase Clearing Account

Ensure that the account is set up correctly in the system:

  • Purchase Order Options:

    • Go to Modules > Purchase Order > Setup > Purchase Order Options.

    • Navigate to the Accounts tab.

    • Verify that the Purchases Clearing Account is properly defined. This will be the general ledger (GL) account where goods received but not yet invoiced will be tracked.

  • Inventory Management:

    • Confirm that inventory valuation methods are correctly configured under Inventory Management Optionsto align with the Purchase Clearing Account tracking.

2. Workflow for Purchase Order Transactions

  • Receipt of Goods Entry:

    • When you receive goods via a Purchase Order, the system will:

      • Debit the Inventory or Inventory WIP (Work in Progress) account.

      • Credit the Purchase Clearing account.

    • This tracks the value of goods received but not yet invoiced.

  • Vendor Invoice Entry:

    • When the vendor invoice is received and entered in Accounts Payable, it will:

      • Debit the Purchase Clearing account (which clears the entry made during goods receipt).

      • Credit Accounts Payable, reflecting the vendor liability.

3. Reconciliation of the Purchase Clearing Account

Regular reconciliation of the Purchase Clearing account is crucial to ensure that no discrepancies occur between received goods and vendor invoicing.

Steps for Reconciliation:

  1. Generate the Purchase Clearing Report:

    • Go to Purchase Order Reports > Purchase Clearing Report.

    • Select the period or date range you wish to review.

    • This report shows the items received but not yet invoiced. It compares the quantities and amounts recorded in inventory to what has been invoiced.

  2. Compare with the General Ledger:

    • Run the General Ledger report for the Purchase Clearing Account.

    • Compare this report with the Purchase Clearing Report to ensure the balances match.

  3. Identify Discrepancies:

    • If there are discrepancies between what’s in the clearing account and what’s on the report, check for:

      • Missing or delayed vendor invoices.

      • Incorrect receipt quantities or prices.

      • Manual journal entries posted to the Purchase Clearing account that may not relate to actual purchase transactions.

  4. Adjustments:

    • If discrepancies are found, you may need to:

      • Manually adjust the Purchase Order or Vendor Invoice.

      • Adjust the General Ledger via journal entries, ensuring the Purchase Clearing account is properly updated.

  5. Month-End Closing:

    • During the month-end closing, verify that all outstanding receipts have been invoiced or accounted for. Any remaining balance in the Purchase Clearing account should reflect only those goods that have been received but not yet invoiced as of the closing date.

4. Common Issues to Watch For:

  • Uninvoiced Receipts: Goods received but not invoiced will inflate the Purchase Clearing balance, leading to an overstated asset position. Review outstanding receipts regularly.

  • Mismatched Quantities or Prices: Ensure that the quantities and prices on the Purchase Order match the vendor’s invoice. Differences here can cause reconciliation challenges.

  • Cutoff Issues: Ensure that receipts and invoices are recorded in the correct accounting period to avoid timing differences.

If you have other questions about the Sage 100 Purchase Clearing Account, Ardent Consulting is at your service. Our team of experts is ready and eager to help you navigate your system challenges and optimize your business's potential. We prioritize your business’s health and are committed to supporting your journey every step of the way.

 

Doug Clark