A computer software technique in which the computer software matches an invoice to its related purchase order and receiving report is called a(n): A. Three way matching B. Document matching C. Disbursement approval D. Automated matching E. Automated three way matching
The correct answer and explanation is:
Correct Answer: A. Three way matching
Explanation:
Three way matching is a standard accounting control process used by businesses to ensure that payments are only made for goods and services that were actually ordered and received. It is a safeguard to prevent errors and fraud in the procurement and payment process. The process involves comparing three critical documents:
- Purchase Order (PO): This is the document that the buyer creates to formally request goods or services from a vendor. It includes details such as item description, quantity, and agreed price.
- Receiving Report (or Goods Receipt Note): This document is generated when the goods are received. It confirms the actual quantity and condition of the goods delivered.
- Invoice: This is sent by the vendor and states the amount that the buyer needs to pay for the delivered goods or services.
In the three way matching process, the software or accounting personnel compares the quantity and price on the invoice with the purchase order and the receiving report. Only when all three documents match is the invoice approved for payment.
This process helps businesses detect and prevent potential issues such as:
- Overbilling or duplicate billing
- Payment for goods not received
- Price discrepancies
- Unauthorized purchases
Using computer software to automate this process improves efficiency and accuracy. Although there are terms like “automated matching” and “automated three way matching,” the foundational term that describes the technique itself is “three way matching.” The automation aspect refers to the use of software to carry out the matching but does not change the name of the technique.
Therefore, the correct term for the software technique of matching an invoice to its related purchase order and receiving report is three way matching.