Firstly, thank you for the Manager program. It is much appreciated.
(using Manager: 22.6.1, OS: Ubuntu 20.04)
My question:
Could someone help me with guidance on appropriate work flow process for the following:
A supplier Utility bill issued in one month and payable in the following month:
When entering a “payment’ with the date of invoice and the bank status “pending”, I had expected the amount to show as a Liability in P&L, and to appear in Accounts Payable report, until “pending” was changed to “cleared”, but this doesn’t happen.
I see in the Guides: “Purchase invoices…are used when buying on credit.”
Is it necessary to use both a Purchase Invoice and a Payment (perhaps accessed via the Purchase invoice), for a payment that is made after the date of the invoice? Is there any way this can be achieved (with appropriate results in P&L and Accounts payable) with a single form?
Further: when the bill is paid: I opened the Purchase Invoice and using the New Payment button, adjusting the date; “Cleared”; and “Create”. The amount still shows in Accounts Payable report and under Liabilities. How should I record the payment of the bill? It seems that it might be necessary to enter the Payment and delete the Purchase Invoice, but this seems a “long way round”.
Yes. The purchase invoice creates the liability in Accounts payable, the payment satisfies the liability.
You can just create a payment. The difference is:
When you first create a purchase invoice, it is posted to the expense account and the payment is posted to Accounts payable and the supplier’s subaccount (and, optionally, the specific purchase invoice).
When you create only the payment, it is posted directly to the expense account.
The decision on which approach to take depends on two key factors. First, are you using cash or accrual basis accounting? Second, how long after you receive the bill from the utility company will you pay it? A cash-basis user would normally just enter a payment. An accrual-basis user can generally do the same if the payment is to be made during the same accounting period. But when the liability has been accrued, but will not be paid off for at least one accounting period, the invoice and payment method is more common.
As @AJD already wrote, Pending/Cleared status is not an accounting distinction, but an administrative one.