We are dealing with “breaking cases” scenarios in business. Such as we have 1 item in “Case UOM” and can be converted to “bag UOM” item with the conversion rate 1 case = 12 bags.
We know Acumatica has multiple UOM functions, however, for historical reason, our company ispreferring to use “ItemA” stand for case item, and “ItemA-I” stands for the bag item (breaking down item). In short, the case item and bag item are with different inventory IDs.
We normally purchased item in case, and sold them in either case or bag. So, we sometimes use “inventory adjustment” to convert case item to bag item.
Unfortunately, during the year end review, we found some users forgot to input “unit cost” for bag item on several documents, not too much but also not too little.
Since the bag item “VGYCS-I” were sold and issued invoiced.
We are afraid of it would make the financial statement incorrect, because it looks like we sold item at 0 cost?
Actually, I have 2 questions here:
1， Is the error I mentioned above would indeed lead to incorrect financial data?
2， If answer to the above question is Yes, how can we fix it?
Best answer by vkumar
The financial numbers won't be impacted as per the scenario explained above. However, the cost of goods sold will be incorrect when those adjusted items are sold.
- When you adjusted the quantity to decrease the quantity in ‘Case’, it
-credited Inventory account
-debited Inventory adjustment account
- When you adjusted the quantity to increase the quantity in ‘Bag’
-debited inventory account (cost zero)
-credited Inventory adjustment account (cost zero)
Since the second transaction had zero cost, the amount remained in the ‘Inventory adjustment’ expense account. Ideally, if the cost was not zero, the amount would have hit P&L account ‘Cost of Goods Sold’ on creating the Invoice.
So, overall Financial numbers won't be impacted, but
- Cost of Goods sold account will be understated (amount sitting in Inventory adjustment account)
- Cost of Sales on specific invoices will reflect zero, so profitability report on those invoices will reflect higher profit.
To fix the issue ( though it's not impacting Financials), one can do the following :
- Identify if those adjusted items are still in stock, if yes, then do a ‘Cost adjustment’ to increase the cost of those units
- If the items are sold, find the total numbers sold and determine the cost, create a Journal transaction to move the total cost of those units from Inventory adjustment account to Cost of goods sold ( Dr. Cost of goods sold account, Cr. Inventory adjustment account)
Hope this clarifies,