In an automated Electronic Data Interchange (EDI) environment, when an integrated accounting system automatically generates and transmits an electronic purchase order to a vendor upon reaching a reorder point, an immediate double-entry accounting record is posted debiting Purchases and crediting Accounts Payable.
Answer: Answer
Answer
The statement is False. Transmitting an electronic purchase order via EDI is an operational order placement and an unexecuted commitment, so no financial accounting entry (debit Purchases, credit Accounts Payable) is posted until goods are delivered or legal title transfers.
The correct answer is False because an electronic purchase order transmitted via EDI is an unexecuted business commitment. Double-entry accounting records for purchases and accounts payable are only recognized upon delivery of goods or title transfer (evidenced by an EDI receiving advice or vendor invoice), not upon sending the purchase order.
Step-by-Step Solution
Key Concept
Accounting Transaction Recognition vs. Electronic Document Interchange in E-Business