All 24 Invoice Processing questions
More in Invoice Processing
What is invoice processing in accounts payable? What is the difference between a PO and a non-PO invoice? What key data fields must be captured from a supplier invoice? What does 'three-way match' mean in one sentence, and why does invoice processing depend on it? What is the difference between an invoice and a receipt? What is a self-billing invoice? Walk through the journal entry when a supplier invoice is recorded. What is a duplicate invoice and how do you prevent duplicate payments? How does electronic invoicing (e-invoicing) and OCR improve AP processing? What are invoice exceptions and how are they handled?
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Accounts Payable & Receivable › Invoice Processing

What is invoice coding?

Beginner

Answer

Invoice coding is assigning the correct general ledger expense account, cost center/department, and tax code to an invoice (or each line) so the cost is recorded in the right place for reporting and budgeting. For PO invoices the coding often flows from the PO; for non-PO invoices the approver or AP clerk applies it.
Non-PO invoice for marketing software, $1,200 + $120 tax:
  Dr  6500 Software Expense (Marketing dept)   1,200
  Dr  1360 Input VAT/Tax Receivable              120
      Cr  2100 Accounts Payable                        1,320
Real-world example A consulting invoice is coded to account 6200 Professional Fees under the Finance cost center so it lands in the right budget line.

Common follow-ups: Where does coding come from on a PO invoice? | Why use cost centers?

Reconciliations Purchase Orders & 3-Way Matching Invoice Processing
All 24 Invoice Processing questions