What is the GL impact of recording Vendor Bills?

Recording vendor bills in a company's accounting system is critical for accurately reflecting the company's financial position. When a vendor bill is recorded, it indicates that the company has received goods or services and now has an obligation to pay for them.

The correct approach is to debit Accrued Purchases and credit Accounts Payable (A/P). This entry reflects that the company has incurred an expense associated with the goods or services received, which is recognized through the Accrued Purchases account. It signifies that these purchases will ultimately be paid to the vendors in the future, thereby establishing a liability recorded in the A/P account.

This method is fundamentally important in accrual accounting, which recognizes expenses when they are incurred rather than when cash is exchanged. By debiting Accrued Purchases, the expense is recorded in the period in which the vendor bill is recognized, ensuring the financial statements accurately reflect the company's obligations and expenses for that period.

Other options may present plausible accounting entries related to vendor transactions, but they do not accurately represent the nature of recording a vendor bill which specifically impacts the Accrued Purchases and A/P accounts in this context.