When purchased items are received, an account posting is made based on the value of the purchased items in the Stock-in-hand or fixed-assets account. Upon selling and delivering these items, an expense (cost-of-goods-sold) is recorded, equivalent to the purchase cost of the items.
As the stock balance increases through a Purchase Receipt, the Warehouse account is debited, and an adjustment account called “Stock Received but Not Billed” is credited. Simultaneously, a negative expense is recorded in the account categorized as “Valuation” or “Total and Valuation” in the taxes and charges table, representing the amount added for valuation purposes to prevent double expense booking.
Upon receiving a bill from the supplier, you will generate a Purchase Invoice against a Purchase Receipt. This action debits the Stock Received but Not Billed account, thereby nullifying the balance in said account.
The balance in the Stock Received but not Billed account reflects the value of items for which a Purchase Receipt has been created but billing is pending.
