Costing Methods and Credit Memos

sajidhanifkhansajidhanifkhan Member Posts: 182
Hi All,

I would like to enquire about the costing method and passing a credit memo entry.

1. Suppose costing method is Average and we buy 12 peices of an item with cost of 1126 and we sold 6 out of it then we buy again 6 peices with same price and then vendor reduces his price and for this he gave a credit memo of 882 for remaing 12 peices but not for all purchased 18 Peices. but average costing system ditributes this 882 amount on all 18 peices instead of 12 peices only and the result is wrong unit cost which effect the profit in minus.

2. Now suppose I changed the costing method to FIFO and did the same entries assuming that credit memo will be applying only on latest purchases and the remaining 6 peices of first purchase but like average it also distributed the credit memo to all 18 peices of item insted of remaining 12 peices.

3. Further more if I change the costing method from Average to Standard it will allow me to change the unit cost as per my desire but is it the right way? Are there any qunciquences for such change?

I will appreciate if any one can suggest any solution to my problem. I hope I described clearly please ask me if there is any confusion.

Regards

Not a devloper
Sajid

Comments

  • ayhan06ayhan06 Member Posts: 210
    if the costing method of item is FIFO,you should move remaining 12 pieces from one location to another location by using transfer order and then you should apply credit memo to the transfer shipment document. this ensures that the credit memo is applied to only remaining quantity not sold quantity..
  • ssinglassingla Member Posts: 2,973
    Are you using "apply to Entry" in the credit memo.
    CA Sandeep Singla
    http://ssdynamics.co.in
  • ssinglassingla Member Posts: 2,973
    Regardless of the practical scenarion and the result expected by you/client, The costing principle does not reduce the amount of credit memo on the left over stock. The total purchase transaction needs to be applied and total cost needs to be reduced.
    The credit memo should be applied to two transactions : for 6 pcs from the first purchase and 6pcs from the second purchase.
    This will give a price as follow :
    1st Purchase : 12 pcs Value 1126
    2nd Purchase : 06 Pcs Value 563

    Credit Note : 12 Pcs Value 882

    Net Cost of First Purchase : 12 Pcs Value 685 (1126-441)
    Net Cost of First Purcahse : 06 Pcs Value 122 (563-441)

    Total Stock Value : 12 Pcs 464.50
    (6 Pcs value 342.50(1st Purchase) + 6 Pcs value 122 (2nd Purchase))

    This is purely an accountants opinion and I guess this will be what your client requires.
    CA Sandeep Singla
    http://ssdynamics.co.in
  • sajidhanifkhansajidhanifkhan Member Posts: 182
    Hi Singla,

    What you says about avaergae cost is right as simple accountant but when you look at the navision costing calculation its not like that. Please see the example below; Kindly copy and paste them in Excel to see it in proper format.
    Start copy from below line;

    Posting Date Item Ledger Entry Type Entry Type Document No. Item Charge No. Description Sales Amount (Actual) Cost Amount (Expected) Cost Amount (Actual) Cost Amount (Non-Invtbl.) Cost Posted to G/L Item Ledger Entry Quantity Valued Quantity Invoiced Quantity Cost per Unit Cost per Unit (ACY) Item No. Gen. Bus. Posting Group Gen. Prod. Posting Group Source Type Source No. External Document No. Valued By Average Cost Item Ledger Entry No. Capacity Ledger Entry No. Entry No.
    15-04-07 Transfer Direct Cost TOS0000952 0 0 2,400.00 0 0 3 3 3 800 800 L000798 PRODUCT Yes 1036398 0 18112775
    15-04-07 Transfer Direct Cost TOR0000951 0 0 -2,400.00 0 0 -3 -3 -3 800 800 L000798 PRODUCT Yes 1036399 0 18112776
    15-04-07 Transfer Direct Cost TOS0000952 0 0 -75 0 0 0 3 0 -25 -25 L000798 PRODUCT Yes 1036398 0 18112783
    15-04-07 Transfer Direct Cost TOR0000951 0 0 75 0 0 0 -3 0 -25 -25 L000798 PRODUCT Yes 1036399 0 18112784
    15-04-07 Transfer Direct Cost TOR0000951 0 0 2,400.00 0 0 3 3 3 800 800 L000798 PRODUCT Yes 1036400 0 18112777
    15-04-07 Transfer Direct Cost TOR0000951 0 0 -75 0 0 0 3 0 -25 -25 L000798 PRODUCT Yes 1036400 0 18112785
    15-04-07 Purchase Direct Cost REC10641 0 0 8,000.00 0 0 10 10 10 800 800 L000798 NR.LOCAL PRODUCT Vendor VEND-00001 12345 No 1036396 0 18112773
    15-04-07 Transfer Direct Cost TOS0000952 0 0 -2,400.00 0 0 -3 -3 -3 800 800 L000798 PRODUCT Yes 1036397 0 18112774
    15-04-07 Purchase Direct Cost REC10643 0 0 7,500.00 0 0 10 10 10 750 750 L000798 NR.LOCAL PRODUCT Vendor VEND-00001 CRM-500 No 1036404 0 18112781
    15-04-07 Transfer Direct Cost TOS0000952 0 0 75 0 0 0 -3 0 -25 -25 L000798 PRODUCT Yes 1036397 0 18112782
    16-04-07 Sale Direct Cost JLM0000397 2,000.00 0 -1,600.00 0 0 -2 -2 -2 800 800 L000798 R.LOCAL PRODUCT JLM0000397 Yes 1036401 0 18112778
    15-04-07 Sale Direct Cost JLM0000397 0 0 50 0 0 0 -2 0 -25 -25 L000798 R.LOCAL PRODUCT JLM0000397 Yes 1036401 0 18112786
    17-04-07 Purchase Direct Cost REC10642 0 0 1,600.00 0 0 2 2 2 800 800 L000798 NR.LOCAL PRODUCT Vendor VEND-00001 5678 No 1036402 0 18112779
    18-04-07 Purchase Direct Cost PPCRM0000110 0 0 -8,000.00 0 0 -10 -10 -10 800 800 L000798 NR.LOCAL PRODUCT Vendor VEND-00001 Yes 1036403 0 18112780
    15-04-07 Purchase Direct Cost PPCRM0000110 0 0 225 0 0 0 -10 0 -22.5 -22.5 L000798 NR.LOCAL PRODUCT Vendor VEND-00001 Yes 1036403 0 18112787

    Finish Copy till Above line.

    I would like to ask about the last entry of 225 which it applied to 22.5 for 10 peices. I did not passed this entry could you give any idea for what reason system is generating this last entry?

    Thanks

    Sajid
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  • ssinglassingla Member Posts: 2,973
    Cant get it properly in excel. Can you send the file in excel to the following address : sunny_1071@yahoo.co.in
    CA Sandeep Singla
    http://ssdynamics.co.in
  • sajidhanifkhansajidhanifkhan Member Posts: 182
    Ok Sandeep I have sent u mail with attachment of excel sheet.

    regards
    sajid
  • sajidhanifkhansajidhanifkhan Member Posts: 182
    Hello guys,

    Still find no replies from any one. SSingla asked deatiled information but he is also quiet.

    ](*,) come on guys please.

    regards
    sajid
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