In a perpetual inventory system, what is the effect of posting an A/P Invoice that is copied from a Goods Receipt PO (GRPO)? Note: There are 2 correct answers to this question.

Question

Options

• AJournal entry reduces cash account
• BStock value increases.
• CAllocation account from GRPO clears
• DVendor's balance increases

• A
  4% (1)
• B
  15% (4)
• C
  81% (21)

Explanation

When a GRPO is posted in a perpetual inventory system, it debits the stock account and credits a temporary allocation (clearing) account - stock has already been received and valued at that point. When the A/P Invoice is subsequently copied from the GRPO, it clears that allocation account (debit) and credits the vendor's account, establishing the liability - making C and D correct.

Why A is wrong: Cash is never touched by an A/P Invoice; it only moves when an outgoing payment is made to the vendor.

Why B is wrong: Stock value increased at the GRPO stage, not at invoicing - the A/P Invoice is a financial document that recognizes the liability, not a stock movement.

Memory tip: Think of the two-step handoff - the GRPO "parks" value in the allocation account as a placeholder; the A/P Invoice "picks it up" by clearing that account and handing the liability to the vendor's balance. No cash, no new stock - just the liability landing in the right place.

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