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The situation of Diamondback Firearms works as a beneficial training for companies in any market. It illustrates the value of keeping yourself ahead of market styles and adjusting to developing buyer choices. Businesses should be proactive in determining adjustments in the marketplace and be prepared to buy investigation and improvement to meet the requirements of the buyers.

• Often accounting clerks will manually match invoice line items against the PO and/or receipt line items by comparing the documents side-by-side as a part of the invoice management process.
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However, PO and receipts are optional and are dependent on how the company runs its business. Should any of the goods or services listed above be purchased on credit by your organization, it is important to immediately record the amount to AP. This will ensure your balance sheet is kept up-to-date and accurately reports on the total amount owed to your vendors, enabling transparency in your book keeping efforts and accounting process.

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When the AP department receives the invoice, it records a $500 credit in accounts payable and a $500 debit to office supply expense. The $500 debit to office supply expense flows through to the income statement at this point, so the company has recorded the purchase transaction even though cash has not been paid out. This is in line with accrual accounting, where expenses are recognized when incurred rather than when cash changes hands. The company then pays the bill, and the accountant enters a $500 credit to the cash account and a debit for $500 to accounts payable. However, bank loans to the company are secured against some securities and large interest payments every period.

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