Definition of Merchandise Received but Not Vendor's Invoice
If a retailer receives merchandise from one of its vendors, but has not received the vendor's invoice, the company has the current asset, inventory, but will not have recorded the current liability, accounts payable.
The accounts payable person/department will have the retailer's purchase order and receiving ticket/record, but is awaiting the vendor's invoice to complete the three-way match in order to record the transaction in the retailer's general ledger account Accounts Payable.
Example of Recording a Liability without the Vendor's Invoice
At any time, the retailer's accounts payable clerk/department will have many transactions waiting to be recorded in Accounts Payable or Vouchers Payable. This is not a problem as long as financial statements are not issued. However, at the end of the accounting period (prior to issuing the company's financial statements) the retailer will have to prepare an accrual adjusting entry to record the amounts owed to vendors but not yet recorded.
The accrual adjusting entry will 1) debit Purchases (periodic method) or Inventory (perpetual method) for the cost of the goods or merchandise received, and 2) credit a current liability account such as Accrued Liabilities.
After the financial reporting for the accounting period is completed, the retailer will typically record a reversing entry to remove the accrual adjusting entry that was recorded prior to issuing the financial statements.
