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68 CHAPTER 3 Introduction to Accounting

Acquisition
An asset can be acquired either externally or through internal processes (e.g.,
the production process). For assets produced internally, a special asset class,
assets under construction, is used during production, and the costs (materi-
als, labor, etc.) are tracked in a corresponding general ledger reconcilia-
tion account. For assets obtained externally, three options are available: (1)
purchase from an established vendor without using the purchasing process;
(2) purchase from an established vendor using the purchasing process; and
(3) purchase from a one-time vendor, or a vendor for whom master data (and
therefore a subledger account) are not maintained.
In the fi rst scenario, a company purchases an asset from an established
vendor but does not employ the full purchasing process. That is, a purchase
order is not created. Instead, the accounting impact of the acquisition is manu-
ally recorded in relevant general ledger and subledger accounts. The process
is similar to the one described in the accounts payable accounting process dis-
cussed earlier in the chapter. In this scenario, however, the company uses the
vendor subledger account and a corresponding accounts payable reconcilia-
tion account instead of the supplies expense account.
In the second scenario, a company purchases from an established vendor
using the entire purchasing process, which involves a purchase order, a goods
receipt, an invoice receipt, and payment. The accounting impact is very similar
to the fi rst scenario, but the impacts are automatically recorded by the steps
in the purchasing process. We examine this process more closely in Chapter 4.
In the fi nal scenario, the asset is purchased from a one-time vendor or a
vendor for whom the company does not maintain master data. In this case,
a vendor subledger account does not exist. The accounting impact of the
acquisition is manually recorded using the asset account (subledger), the cor-
responding reconciliation account, and a specially designated clearing account.
Recall that clearing accounts are used to hold data temporarily until the data
are moved to another account.
Figure 3-19 illustrates the acquisition of an asset from a one-time vendor.
In this illustration, a company purchases a new desktop computer from the
vendor for $5,000, with payment to be made at a later date. As a result of this
purchase, asset master data for the new computer (Desktop Computer #14) are
created. This is a subledger account that is associated with the offi ce equipment
and computers account in the general ledger.
When the purchase is completed (Step 1), the asset subledger account is
debited by $5,000, and the asset acquisition clearing account is credited by the
same amount. At the same time, the offi ce equipment and computers account
in the general ledger, the reconciliation account, is debited. When the com-
pany receives an invoice (Step 2), the clearing account is “cleared” with a debit
posting, and a corresponding credit is posted to the payables–miscellaneous
account. Note that this is not the same account as the one used in the accounts
payable process. In that process the accounts payable reconciliation account
was used. In this case payables–miscellaneous is not a reconciliation account
and therefore can be posted to directly. Finally, when the company pays for the
computer via a check (Step 3), the payables–miscellaneous account is debited,
and the bank account is credited.
An alternative scenario may involve a loan, in which case there is no
accounts payable account or bank account. Rather, a notes payable account is
used to clear the asset acquisition clearing account.

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