Many companies record both purchase orders and purchases;when would such a company recognize in the financial statements the purchase?
A)When the purchase order is issued.
B)When the supplier receives the purchase order.
C)When the products are received from the supplier and accepted.
D)When the products are sold.

Question

Quizplus · Accepted Answer

A company would recognize a purchase in the financial statements when the products are received from the supplier and accepted. This is because at this point, the company has incurred a liability to pay for the products and has received an asset in the form of inventory. It is only at this point that the transaction has been completed and can be recorded in the financial statements. Purchase orders and purchases are both important records of the transaction, but they do not by themselves represent a financial impact on the company.

Many Companies Record Both Purchase Orders and Purchases;when Would Such