This chapter on purchasing/accounts payable transactions and costing covers the purchasing life cycle, including PO returns and subcontract purchase orders, followed by a section on receiver matching and accounts payable.

Functions in both Purchasing and Accounts Payable modules affect costs and generate variances.

On the purchasing side, costs are not affected and general ledger transactions are not created until you actually record a purchase receipt or return. At this point, Inventory (or Expense) is updated and the purchase amount accrued.

In a standard cost system, a PO receipt is booked at standard cost and the accrual is booked at actual. Any difference is a variance. On non-base currency POs, some of this variance can be a result of exchange rate fluctuations. The rest is booked as a Purchase Price Variance. Returns do the reverse.