negative cost value with quantity zero

tjchan

Need some help:

With standard costing method, the standard and unit cost are pre-defined. For the following scenario, you will get the result of negative cost value with zero quantity in the stock valuation report.

1. create an item with standard cost 100 LCY.
2. put in some purchases and some sales. Do not fully issue the stock.
3. change the standard cost from 100 to 120.
4. make further sales until it hit zero.
5. print inventory valuation report and you will find that the cost value is negative but the quantity is zero.

I have tried to run the ACIE but the negative value still appear. How to correct this problem? Please if anyone encounter this before, I would appreciate it if you could help.

Thanks
TJ

chaswin

I think the problem is that changing the standard in this way does not cause the stock to be revalued. Since the value is the sum of the transactions, the issues at the higher cost take out more value than the receipt put in.

The reverse should also be true when, if you reduce the cost, you would have zero stock but a positive value.

The only way to change the cost is through the revaluation procedure.

i4tost

I think that you are not right.
Check the field "Applied Entry to Adjust" value of all entries. I think at least one of them will have value Yes. It means, that the cost adjustment is not fully done. Or maybe at least one entry will have "No" value in field "Completely Invoiced".
Standard costing purpose is to place the standard price on new positive entries except transfer. Negative entry always gets the cost from positive entry (in standard costing).
So, please recheck your example. I've checked and everything is OK.

chaswin

In the on-line help for 3.6 it says:

"You can change the standard cost, but this will only affect new postings. If you want to change standard cost for already posted entries, you must use the revaluation journal".

I ran a test in 3.6 and was able to get a negative value using the procedure you outlined. This was not corrected by either of the periodic activities. The stock valuation report showed a SOH of zero with a value of -600.

However when I purchased a further 100 at the new standard of 120, I was surprised to see that a value entry had also been generated for a debit of 600 against the negative adjustment that reduced the original purchase to zero.

The stock valuation report then showed a stock of 100 with a value of 12,000. This was not affected by the periodic updates after I issued a further 60.

Bottom line is that it seems to be self correcting.

chaswin

Just did another test - it's the ACIE that generates the correcting entry. As i4tost suggests it looks like the ACIE checks that all the value of the original purchase has been recovered and if not it posts a correcting entry such that the value of the issues equals the value of the original purchase. (Presumably this would be a negative value if an under recovery had taken place due to the standard cost reducing).