Final answer:
Two-way match is an accounting process where the purchase order and vendor invoice are compared to confirm details before settling a payment, ensuring transactions are authorized and accurate.
Step-by-step explanation:
Two-way match is a process used in the business and accounting field for settling receipts by verifying and matching two related documents: the purchase order and the vendor invoice. This method is employed to ensure that the payment is accurate and to prevent any unauthorized transactions. Companies use it to validate that the quantity, price, and terms on the invoice match what was agreed upon in the purchase order.
In a typical two-way match, the first step is to compare the purchase order issued by the company to the vendor's invoice to ensure that the charges are according to the items or services received. Once these documents match in terms of quantity and price, the payment is authorized, and the accounts payable process continues. This system is an essential part of internal control procedures to help companies manage their cash outflows effectively.
By implementing the two-way match, businesses can minimize the risk of overpayments, fraudulent charges, and discrepancies in billing, thus maintaining accurate financial records and enhancing the overall efficiency of the accounts payable department.