How to enter inventory, downpayment and balance payment

Scenario:
Polo Shirt size S 50unit for $20 = $1000
Polo Shirt size M 50unit for $22 = $1100
Polo Shirt size L 50unit for $25 = $1250
Total: $3350

I made a downpayment of $1000
Balance of $2250 to be paid when received the Polo Shirts in later date

When should I enter the new inventory? Is it the moment I made the downpayment or after I made the full payment?
Also how to journal the inventory downpayment and the balance payment?

Enter the downpayment (deposit) when you make it. Enter the purchase invoice when you receive the supplier’s sales invoice. For information on how to handle the deposit, read this Guide: https://www.manager.io/guides/7095.

Thanks Tut,

I have tested out by following the link given by you, it looks like I have to enter go through multiple steps eg:

  1. Enter the Account payable via the spend money against the supplier for the downpayment (deposit)
  2. When goods received, use Purchasing Invoice to enter the quantity and amount. Save the Purchasing Invoice.
  3. Next, Spend Money to pay the remaining balance

Am I correct?

Almost correct. First, the deposit is not an account payable because the supplier hasn’t earned it and has no right to the money unless the goods are delivered. But the method Manager uses to get it into the supplier’s subaccount is via Accounts payable. So the step you describe is correct.

Second, the purchase invoice should be entered when you receive the supplier’s sales invoice. That is what establishes your obligation to pay, not necessarily receipt of the goods (depending on terms of the purchasing agreement or contract). Often, of course, the sales invoice comes with the goods, making the difference immaterial. The purchase invoice will be automatically reduced by the deposit you made earlier.

As a final note, when you spend money to pay off the balance due, you don’t technically need to specify the purchase invoice number. But it is cleaner if you do, especially if you have frequent purchases from that supplier. It will help keep payments aligned with invoices.

That’s very clear. Thanks Tut.

In relation to Cash Advances, which similar to the deposit, but the money was given to my worker to use to purchase inventory. For example, I gave him $1000 and he went to the stores to purchase $750 worth of office stationeries. He returned with $250 and the stationeries. How do I enter the cash advances, the return of the balance and the inventory?

I would not regard giving the money to your employee as a transaction. Assuming you took the money out of petty cash, all you really did was give him temporary custody of the money. So just enter a cash transaction, spending 750 from petty cash, posted to the Office supplies account or wherever you would normally record purchase of stationery. And, of course, put the remaining 250 back into petty cash.

Now, if you gave him 1000 of your personal money, that is different. Then, enter an expense claim for 750 with yourself as payer. Post it to the Office supplies account. But it doesn’t sound like that is what you did.

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Then you would write out a chit (IOU), signed by the person who the money was given to.
This way the petty cash is always in balance as the cash + receipts + chits = petty cash balance
When the person returns with 750 receipt + 250 cash - give the signed chit to the person.

Without the chit - the petty cash is out of balance while the money is out of it and there is no auditable trace of where that variance is. The employee could deny receiving it.

I agree. My advice was only from the perspective of entries into Manager. Proper management and safeguarding of negotiable cash is a separate issue. I would certainly never give an employee cash (of any amount) without documentation.

I totally agreed with your advice. How I wish my employees would purchase the items with their own money and we reimburse them. It is not that straightforward in the country where we live. It is difficult for people here in general to dig their own pocket money to purchase things for others. Most employers have to come out with cash advances for any cash purchases.

In our case, we have the Cash Advance Form to document the advances. On the Manager, we used the spend money from the Petty Cash for the advances, and when he returned, we verified the receipts and on balances we made the editing to the Petty Cash made earlier.

This is the “chit” @Brucanna mentioned previously. Keep it with the petty cash. It solves all problems.

There is no need to also record a payment to the employee for the cash advance. You can do that if you want, but then you must enter a receipt for money returned as well as an expense claim for the purchase made by the employee. Think of it this way: if you enter a payment for the cash advance, the money now belongs to the employee, not the company. But if you want the stationery expense to be recorded on the company’s books (that was made with money now belonging to the employee), you need the expense claim to record the purchase made on your behalf. And when the employee returns leftover money, you have to receive it, or there will be additional income to the employee and tax implications.

This is very poor practice. If you paid the money out, you need to record it properly. And, again, you must record the difference coming back in.

The cash advance form documents the money given to the employee in case it is lost or stolen. But if everything goes smoothly, all you need to do is record the cash transaction of purchasing the stationery from petty cash. And either given the cash advance form back to the employee or mark it as cancelled.