Expected cost

NavStudent

Hello
Recently I asked by a client to be able to setup expected cost only for purchasing, or only for sales.
I would like to know from accounting perspective it makes sense.

Also programming wise what will it take.


thanks.

ssingla

From Accounting Prospective:
International and most of the local accounting laws require the bussiness to state the state of affairs i.e. Balance Sheet on accrual basis. Accrual basis requires you to recogonize the cost and revenue as when they accrue and not on the payment.
All the balance sheets requires to recogonize the assets and liability on the date of preparation. This includes the goods received but not invoiced and goods dispactched not billed. In order to ensure the smooth recogonition companies invoices everything on the closing date or else pass the journal voucher to adjust the balances.

From a accountant/auditor point of view, absence of one case (either received and not invoiced or shipped not billed) will impact the true and fair presentation of balance sheet and will call for auditors remark/qualification in the audit report.

I hope this makes things clear.

bbrown

ssingla wrote:

...From a accountant/auditor point of view, absence of one case (either received and not invoiced or shipped not billed) will impact the true and fair presentation of balance sheet and will call for auditors remark/qualification in the audit report. ...

How is missing one any different form missing both?

When "Expected Cost Posting to G/L" is turned off, the uninvoiced dcouments (sales & purchases) result in a difference between the Inventory Valuation and associated GL account balances. The "Inventory to GL Reconcile" report is the tool to reconcile these differences. Even if only one subledger does not post its expected cost, doesn't this reconciliation remain valid?

ssingla

When "Expected Cost Posting to G/L" is turned off, the uninvoiced dcouments (sales & purchases) result in a difference between the Inventory Valuation and associated GL account balances. The "Inventory to GL Reconcile" report is the tool to reconcile these differences. Even if only one subledger does not post its expected cost, doesn't this reconciliation remain valid?

I only meant that you can not prepare balance sheet without adjusting for Expected Cost either manually or thru system. Absence of One will create problem and of both surely will.

It makes no sense to me to have one sided system. Its better to have both or none.

Alex_Chow

NavStudent wrote:

Hello
Recently I asked by a client to be able to setup expected cost only for purchasing, or only for sales.
I would like to know from accounting perspective it makes sense.

Also programming wise what will it take.


thanks.

A way around it is to make the expected cost accounts go to the same accounts as your regular purchases accounts.

This doesn't eliminate the problem of creating unnecessary transactions. But it does address your client's request.

Alex_Chow

ssingla wrote:

From Accounting Prospective:
International and most of the local accounting laws require the bussiness to state the state of affairs i.e. Balance Sheet on accrual basis. Accrual basis requires you to recogonize the cost and revenue as when they accrue and not on the payment.
All the balance sheets requires to recogonize the assets and liability on the date of preparation. This includes the goods received but not invoiced and goods dispactched not billed. In order to ensure the smooth recogonition companies invoices everything on the closing date or else pass the journal voucher to adjust the balances.

From a accountant/auditor point of view, absence of one case (either received and not invoiced or shipped not billed) will impact the true and fair presentation of balance sheet and will call for auditors remark/qualification in the audit report.

I hope this makes things clear.

The Inventory to G/L Reconciliation report is created to specifically address this. From the amounts on the report, a user can post the accruals using the general journal. You don't necessarily need to turn on Expected Cost Posting.

Personally, I always suggest this be turned off during new implementations. If it's turned on, we figure out a cut off point and turn it off.

ssingla

Personally, I always suggest this be turned off during new implementations. If it's turned on, we figure out a cut off point and turn it off.

Me too subject to the nature and complexity of bussiness.