why there are expense account entries being made here since in a perpetual inventory system, it is the inventory/stock journal that should be affected (unless it’s the COGS account).
No entries are created involving the ‘Account Stock’ or the Stock Journal when a shipment is received. Only if the invoice is validated after shipment reception, then ‘Account Stock IN’ is debited. Since no ‘Account Stock’ entries are being made, which account should be used for stock valuation? Should ‘Account Stock IN’ and ‘Account Stock OUT’ be set to the same account?
The stock move will be created when your receive the shipment from the supplier. If you do not receive any shipment it is expected that stock valuation is not updated.
My fiscal year is set to use ‘Anglo-Saxon’ account stock method. My shipment/incoming move does have the unit price (it is taken directly from the Purchase Invoice):
In both the above Cases, if reception is not done, the amount on the Account Stock IN is not equal to the payable amount and the entries on the Expense account are rather confusing.
Do the above entries make any sense or should the shipment reception always be done before invoice validation?
But how could it be cleared with a setup where cost prices are so different from the purchase price.
When I’m asking what you expect, I would mean the exact accounting moves.
If you don’t want the confusing entries to show in the Expense account then you must not enter a unit cost for the product and leave it zero. Under the Average cost price method, the system will compute and assign the correct cost to each purchased product when you execute the shipment reception. The cost will be computed based on the price and quantity paid on purchase (from the purchase invoice). This way the Account Stock IN is cleared when the both: purchase invoice is posted and shipment received.
Continuing with the discussion started by Iocx regarding the Anglo Saxon inventory accounting, I am a bit confused too why the resulting accounting move from a purchase invoice has a line where the additional costs of the product is always placed to the expense account instead of putting it together in the line that debits the Stock IN account. In my opinion, the additional costs whether it is from a price increase or landed cost should all be part of the inventory cost.
The difference between the cost price and the invoiced price can not be in the stock account because it will then never be removed when the product is leaving the stock (like sold or lost).
The problem is to have a cost price that is different but also probably to use post the invoice before having do the receipt of the goods in the stock because in this case the system must use the default cost as no other data is available.
For what I understand about handling the stock account is that if I have a new batch of products (from a purchase) that is added to the inventory, it can use the unit price from its origin purchase invoice as its cost value, hence the total cost is transferred from Stock IN to the Stock account (in the shipment move), and at the same time if there is existing inventory for the same product, the system will update the cost per item to a new average using the newly added inventory; i.e. new_unit_cost = ((existing_cost * existing_count) + (new_cost * new_count)) / (existing_count + new_count).
So when the product leaves the stock (sold or lost) it just use its newly updated new_unit_cost and the correct values are removed from the Stock account.
I see it the other way, if a stock is received before the purchase invoice is posted then the unit cost for the product will have to be the default cost as no other data is available. But if the flexibility for allowing shipment reception before posting purchase invoice is not very compatible with the Anglo Saxon inventory valuation, why don’t we just block it and never let that happen? I.e. no inventory shipment can be done without proper purchase invoice associated, when Anglo Saxon mode is enabled.
