Hi Arun

Whenever a purchase order is placed, the items ordered are not reflected in inventory until received . Say PO is placed for 50 items for amount  500$ and  a partial shipment of 10 items is received worth $100 ( an asset $100) . But zero units have been processed since invoice is yet to be received from the supplier. In order to appropriately reflect the liability  Accrued Inventory will carry a value of $100 .  Once the vendor invoice is processed , the liability from Accrued Inventory will be removed and will placed under accounts Payable liability account.  Hope this helps let us know if still any doubts.