I am reading an accounting textbook. It says that when we purchase inventory, we record it in Raw Materials Inventory when the items are received and not when actually purchased.
For example, I order $1000 of inventory in April 28,2012 but receive it on May 4, 2012. I am using the Accrural Method for my books. I thought that under this method, I have to record the expense at the time it is incurred and not when I pay for it.
This would mean that I record the $1000.00 as an expense in April and not in May. I would debit my Raw Materials Inventory by $1000 and credit the vendor account by $1000.00 on April 28th.
The textbook says that I should record the inventory and expenses incurred on the day I receive it, which is May 4th. Is this correct? Why or Why not?Is this how it is done in businesses?Wouldn't doing it this way violate the Accrural Method of recording expenses or I think the Matching Principle?