What journal entry accompanies three-way matching in accounts payable?

Which steps in the purchase cycle post to the ledger?

Three-way matching is a check, not a posting. AccountingCoach's explanation of accounts payable describes the purchase order as prepared to communicate and document precisely what the company is ordering, and says a vendor's invoice is entered into accounts payable only when the purchase order, receiving report and invoice agree. The same explanation ties recording to receipt, not to the order: under the accrual method, a company receiving goods or services on credit must report the liability no later than the date they were received, and items ordered and received before a December 31 close must be recorded as of that date. The entries come from the events on either side of that check:

The purchase order still matters to the books, because it supplies the price. AccountingTools' definition of an accrued liability says the accrued amount recorded when an invoice has not arrived by the period end is usually based on quantity from the receiving log and pricing from the authorizing purchase order. A receipt entry applies the same basis earlier, when the goods arrive. Booking the order itself would record a cost and a liability for goods that may never arrive. Running the match itself is a separate question.

The entries below follow one purchase. A business orders 200 units at 12.50 (2,500.00) on June 10, receives all 200 on June 28, gets an invoice dated July 3 for 200 units at 12.75 (2,550.00), and pays on August 2. The goods are merchandise in a perpetual inventory. None of the 200 units is sold before the invoice is posted.

What is the entry when the goods or services arrive?

The receipt is the first posting. Debit the account for what was bought and credit a liability for goods received but not yet billed (received-not-invoiced). AccountingCoach's accounts payable explanation gives the entry for amounts incurred but not yet in accounts payable: credit Accrued Liabilities and debit the appropriate expense or other account. A system that records receipts makes that entry when the goods arrive rather than at the period end.

Value the receipt at the quantity received times the purchase-order price:

Accounts payable does not move. There is no invoice yet, so nothing is owed in the vendor's ledger.

What is the entry when the matched invoice is posted?

The invoice does not record the cost again. It moves the liability out of received-not-invoiced into accounts payable and adds any difference between the billed and received amounts. AccountingCoach's accounts payable explanation says recording an approved invoice includes a credit to Accounts Payable and a minimum of one debit to another account. When a receipt was recorded, the debit is to received-not-invoiced for the amount the receipt accrued, with any price difference posted on its own line:

Received-not-invoiced is back to zero, inventory carries 2,550.00 for 200 units, and the vendor is owed 2,550.00.

If you accrue a receipt yourself with a period-end entry, you can instead reverse it at the start of the next period and enter the invoice normally, as AccountingTools' definition of an accrued liability describes; the net effect is the same. Before reversing by hand an accrual your system posted from a receipt, check what posting the invoice does: in Microsoft Dynamics 365 Business Central, it already balances the interim accounts, so a manual reversal would relieve the accrual twice.

The mistake to avoid is entering the invoice as though nothing had been received: debit inventory 2,550.00, credit accounts payable 2,550.00. Inventory then shows 5,050.00 for the same 200 units, and the 2,500.00 accrual stays open with nothing to clear it.

Post the invoice through the bill or vendor-invoice document, not a general journal entry to accounts payable, so the liability reaches the vendor's ledger as well as the control account. AccountingTools' definition of the accounts payable ledger says the general ledger balance for accounts payable is compared to the ending ledger balance to ensure that the two match.

How is the payment recorded, and why is it separate?

Payment settles the payable and records no cost. AccountingCoach's accounts payable explanation says that when an account payable is paid, Accounts Payable is debited and Cash is credited:

The receipt and the invoice move cost and liability accounts; the payment moves only accounts payable and cash. Between July 3 and August 2, the 2,550.00 in accounts payable is an invoice owed and not yet paid, which is all that balance should ever mean.

Which account takes the debit?

What was bought decides the debit, both at receipt and for any invoice difference. The match is identical for every purchase, but the accounts are not:

AccountingCoach's explanation of inventory says that under the perpetual system the inventory account is increased with the cost of merchandise purchased from suppliers and reduced by the cost of merchandise sold, while under the periodic system purchases are recorded in one or more Purchases accounts. Under a perpetual system, the receipt of inventory lands on the balance sheet and the cost reaches the income statement only when the goods sell; moving it to cost of goods sold is covered in the related question on recording inventory. Under a periodic system the receipt is debited to Purchases, and the same explanation says the Inventory account is adjusted to the cost of the merchandise actually on hand at the end of the year.

AccountingCoach's accounts payable explanation says equipment will be recorded as an asset, and the cost of a service is reported on the income statement as an expense. For job costing, OpenStax's managerial accounting text says purchases not tied to a particular job stay in raw materials inventory until assigned to a specific job. The raw materials row covers only materials bought for stock; for a purchase charged straight to a specific job, agree the entry with your accountant.

So the same match produces an asset for merchandise and equipment and an expense for a service. Whether a purchase is large enough to capitalize, and which inventory costing method applies, are decided outside these entries.

Where does a price or quantity difference go?

The gap between what was received at the order price and what was billed is what the match exists to find, so post it where it can be seen.

With actual costing, a price difference is part of the item's cost, as with the 50.00 above, because AccountingCoach's explanation of inventory says the inventory account is increased with the cost of merchandise purchased from suppliers. The same explanation says the inventory balance should reflect the cost of the items currently on hand, so this holds for goods still on hand. If some of the goods have already been sold when the invoice arrives, agree with your accountant where the difference on those units goes. For an expense purchase, post the difference to the expense account on its own line described as a price difference, as the example's Inventory (price difference) line does, so it can be listed and reviewed at each close.

If you are a manufacturer that carries inventory at standard cost, AccountingCoach's explanation of standard costing shows the purchase recorded with inventory at the standard cost, accounts payable credited for the actual amount owed to the supplier, and the difference in a price variance account. In that example the goods and the invoice arrive together, so there is no receipt accrual, and the variance is measured against standard cost. If you post receipts, the invoice debits received-not-invoiced for what the receipt accrued, never inventory a second time.

Either way, do not let differences vanish into an expense account unexamined. AccountingCoach's standard costing explanation notes that a variance tells management that the actual manufacturing costs are different from the standard costs.

A quantity difference works differently, because the accrual holds only what was received. If the invoice bills fewer units than arrived, relieve the accrual for the units billed and leave the rest open until they are invoiced. An invoice for units that never arrived does not match: AccountingCoach's accounts payable explanation says a vendor's invoice is entered into accounts payable only when the three documents agree, and resolving the mismatch is part of running the match, a separate question.

What does the balance look like when receipt and invoice fall in different months?

The receipt entry is what puts the purchase into the month it arrived. In the example, the June close falls between receipt and invoice:

June's balance sheet shows the goods and a 2,500.00 obligation although no invoice exists yet, and in July only the 50.00 price difference is added to inventory. Had the purchase been a service used in June, the expense would fall in June for the same reason; without a receipt entry or a period-end accrual it would slip into July.

What changes if your system does not record receipts?

If receipts do not post, the posted vendor invoice is the first entry. It debits the cost account and credits accounts payable directly, and nothing passes through received-not-invoiced during the month.

The gap appears at the period end, when goods received but not yet billed are missing from both cost and liabilities. AccountingCoach's accounts payable explanation, using a December 31 close, says items ordered and received before that date must be recorded as of that date through an accrual-type adjusting entry. Reverse it in the next period, as AccountingTools' definition of an accrued liability describes, and enter the invoice normally when it arrives. For a 1,200.00 repair finished in June and invoiced on July 5:

June carries the expense, the reversal and the invoice cancel out in July, and the vendor's 1,200.00 sits in accounts payable.

For goods held as inventory, the period-end accrual debits Inventory (perpetual) or Purchases (periodic) instead of an expense. AccountingCoach's accounts payable explanation warns that the cut-off becomes more complicated and often more significant with inventories: some goods can be in the physical count before their cost is recorded in accounts payable and in Inventory or Purchases.

How does accounting software generate these entries?

The details below are for Microsoft Dynamics 365 Business Central and come from its expected cost posting page, last updated 2026-03-17. For another system, check its own documentation for whether posting a receipt creates a ledger entry and which account it credits; if receipts do not post, follow the section on systems that do not record receipts.

In Business Central, both entries come from posting the receipt and invoice documents, and the account setup decides where they land. To find or correct them, look at those documents and that setup rather than the general journal. The page shows how much depends on setup:

• Receipts post only when set up to. A received but uninvoiced quantity creates an expected cost that is not posted to the general ledger unless the system is set up to do so. Turn on Automatic Cost Posting and Expected Cost Posting to G/L on the Inventory Setup page.
• Interim accounts hold the accrual. Once set up, the expected cost is posted to interim accounts at the time of receipt, and the example's receipt credits an Inventory Accrual Account (Interim) and debits an Inventory Account (Interim). When the invoice posts, both interim accounts are balanced and the actual cost goes to the inventory account. The Inventory Account (Interim) is set on the Inventory Posting Setup page and the Invt. Accrual Acc. (Interim) on the General Posting Setup page.
• Items only. Expected cost posting covers only item transactions; the page excludes "immaterial transaction types, such as capacity and item charges" and does not say how a received service posts, so check whether a service receipt posts anything before adding the period-end accrual above.

What should you watch in the received-not-invoiced account?

The account should hold only receipts still waiting for an invoice, so its balance should equal the list of those receipts. AccountingCoach's accounts payable explanation says the period-end cut-off includes reviewing the receiving reports that have not yet been matched to vendor invoices. At each close, agree the balance to the open-receipt list and look at the oldest lines. An old line is a receipt no invoice has relieved, and these are common causes to check:

• Invoice not yet received. The accrual is right; ask the vendor for the invoice.
• Invoice posted without the receipt. The cost is on the books twice, as in the mistake above; correct the bill so it relieves the receipt.
• Receipt wrong. The receipt overstated what arrived, or a return was never recorded against it; correct the receipt.
• Partly billed. The vendor has invoiced some units, and the rest is waiting for a later invoice.

A rising balance can also just mean more receipts are waiting for invoices; compare it with the open-receipt list before concluding anything is wrong.

Does any of this apply to cash-basis books?

Not as described. AccountingTools' article on cash accounting says that under that method expenses are recognized when cash is paid, and transactions are recorded only when cash is received or spent. The purchase order, the receipt and the invoice post nothing, and there is no received-not-invoiced or accounts payable balance to relieve. The only entry is the payment, debiting the account for what was bought and crediting cash. The three-way match can still decide whether to pay, but it has no ledger effect until the money leaves. If your books record purchases only when you pay them, none of the receipt or invoice entries above arise. The same article notes that some software offers cash accounting as a setup option that produces cash-basis statements; if your software still records bills before you pay them, the invoice entries above still appear in your ledger.