Purchase order issued amount not refelecting as Liabilities

Its normal that when we issue the P.O, we or confirming the order and we are liable to pay that amount. In manager only when we get the purchase invoice, it gets reflected as liability, Is that any process i’m missing out how to do it or is there any way we can account the purchase order issued as liability. Tnx

Purchase order cannot be considered as a liability due to the very reason that there is no guarantee your supplier would supply the items. it is a liability only when the supplier has actually supplied you the items. this is recorded by the purchase invoice.

@sharpdrivetek, Hi, thanks very much for your swift reply. This is ok for the PO, where the delivery effects within a short period, some times the delivery lead time will be about 30/ 40 days. If we need this to reflect on our accounts, is there any where i could enter this amount, if so how. tnx.

just create the purchase invoice with the Invoice number set as PENDING. when you receive the invoice, just edit this invoice and change the date and invoice number accordingly.

Purchase order as said above by @sharpdrivetek shouldn’t show as liabilities in the balance sheet. I’m sure you need that to appear as a liability to remind you of the obligation.
I made a suggestion some time back on how we could easily monitor orders with Manager.io
my suggestion is to let Manager.io show the status of Orders according to the balance on the order.

Please read the discussion below and add your voice.

@Abeiku Hi, tnx for your reply, On the customer side workflow, the documented & financial tracing is perfect and satisfactory. My concern is only the purchase side, when we need to consider the purchase orders as an liability and how to track it or to get it reflected to the respective account heads. I prefer some custom heading or way where i can see this total PO issued, coz in any audit or finalization the total POs also taken accounted for funds allocation(liability).

Well A purchase order is a contract document and the terms of the contract determines the level of liability.
Like said by @sharpdrivetek earlier, POs are not to change the financial position of a company (Balance Sheet and Income Statement).
I dont know the details of the POs you have with your suppliers, maybe the details in the PO is such that liabilities will have to be recognised but generally speaking a PO is non posting, they do not affect any financial accounts.

If Purchase order raises liabilities, what will the invoices raise? Take it from us, POs are not to be reflected in the financial statements, not even as a contingent liability.

Because it just an order and an order doesn’t have legal backing.

@Abeiku, Thanks for your reply, In our business where the spares manufactured against order and the production time itself will take about 5 to 6 months, and the purchase order in legal terms cans say as irrevocable purchase order, where if you cancel the order, the buyer will still has pay 70% of the purchase value, as its manufactured against order. Once again txn for your time n reply.

Okay then it makes sense what you want to do with purchase Order.

Solve the problem this way:

Create a control account under liabilities made of of special accounts (Call it Irrevocable Purchase contracts).

Create special accounts under the created control account for your suppliers.

When Contract are signed just use the journal entry.

Debit Whatever Expense accounts or Asset accounts involved.
Credit the supplier special account.

When you finally have to pay, you will select Supplier Irrevocable Purchase contracts -> Supplier Special Account and enter amount to pay under Spend Money.

Or when you receive the invoice, use a journal entry to transfer the amount payable to the suppliers account under account receivable using the invoice as the source document.

Debit Supplier Irrevocable Purchase contracts -> Supplier Special Account
Credit Account Payable -> Supplier’s Account
Spend money to pay the amount.

Your real obligation will be 70% of the contract amount

@Abeiku Good Day, Thanks for the above suggestion. Will try and address any issue. Tnx once again

I would create a bill with name " PO # xxxxx0123" accordingly for the amount in part (70%) or in full for the PO in question and just make sure not to pay it until the PO is recieved or cancelled, because bills are true liabilities that reflect on the balance sheet properly
The PO essentially turns into a bill at the moment of receipt anyway, you are just skipping ahead a little.

**Your balance sheet won’t ‘balance’ until you have the assets to counter the liability (until you receive the goods to justify the bill)

@C_S, I am not sure why you are responding to a 2 year old topic. However:

  • In Manager, there is no such thing as a “bill”
  • Payments are not made against purchase orders
  • Purchase orders do not turn into anything, irrespective of whether goods are received
  • The balance sheet is always in balance in Manager, and will be forced to be if necessary by automatic adjustments to a Starting balance equity account