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P2P

The document describes the procure to pay (PTP) cycle and the corresponding accounting entries at each step, including: 1) Purchase requisition is created by a department to request goods or services, which then needs approval before a purchase order is created. 2) A purchase order is sent to a vendor, who supplies the goods or services and bills the company. 3) When goods are received, a goods receipt is recorded, debiting inventory and crediting goods receipt account. 4) Upon receiving an invoice, an invoice receipt is recorded, crediting vendors and debiting goods receipt account to create an accounts payable liability. 5) Vendor payments are made through an automatic

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77 views3 pages

P2P

The document describes the procure to pay (PTP) cycle and the corresponding accounting entries at each step, including: 1) Purchase requisition is created by a department to request goods or services, which then needs approval before a purchase order is created. 2) A purchase order is sent to a vendor, who supplies the goods or services and bills the company. 3) When goods are received, a goods receipt is recorded, debiting inventory and crediting goods receipt account. 4) Upon receiving an invoice, an invoice receipt is recorded, crediting vendors and debiting goods receipt account to create an accounts payable liability. 5) Vendor payments are made through an automatic

Uploaded by

Ananthakumar A
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Procure to pay cycle and accounting

document at each step

Below picture explain procure to pay (PTP) cycle and corresponding accounting entry at each step.

Purchase requisition:
There are various departments in an organization. Departments may require certain material or services.
Employee belonging to the department needs to raise purchase request or purchase requisition. This purchase
requisition needs to have information like name of material/ services, quantity, expected date of delivery and
expected price. Purchase requisition may also need to be approved by head of department before initiating
finance department approval. Once finance department officer approves the purchase requisition, purchasing
group creates the purchase order for purchasing department to act on it.

Purchase order:
Once purchase order is created, purchasing department initiates the procurement process. Purchasing
department gives purchase order to vendor; vendor supplies the goods or services to the company and bills the
company accordingly.
A purchase order has information like: Order type, vendor, material/ services, quantity, purchase price,
delivery date, terms of payment etc.

Goods receipt (GR):


When organization receives the goods, Good receipt (GR) is posted in sap using T code: MIGO
Below accounting entry is posted in sap
DR. Inventory account
CR. GR/IR account

Invoice receipt (IR):


When organization receives the bill from vendor, invoice receipt (IR) is posted in sap using T code: MIRO
Accounting document for vendor invoice is posted in sap as below
CR. Vendor
DR. GR/IR
Liability (accounts payable) is created to pay vendor.

Vendor Payment:
Vendor needs to be paid on time. (Organization may have large number of vendor with huge number of
invoices due for payment. Hence, provides the functionality to automate the payment process.)
Automatic payment program (APP) is executed. It picks up the invoices due for payment and processes them
for payment.
Below accounting entry is posted as a result of APP:
DR. Vendor
CR. Bank clearing account
Once organization receives bank statement online, bank statement is loaded into sap and automatic bank
reconciliation happens which results in below accounting document:
DR. Bank clearing account
CR. Main bank account

Overall procure to pay cycle can be summarized as below:


Purchase requisition--> Purchase order--> GR-->IR-->Payment

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