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Re: Purchase price variance / cost tier adjustment

by
John Pia Jr
- 10/06/2016 16:57:00

My goal is to have real time inventory value. I'm using real price now ( I just assumed that real price just adds the suggested price for any given product, then on the purchase order I can chnage it.)

Let's take this example:

I receive 10 widgets with a PO price of $10/widget - this debits my suspense account for $100 (clearing account /or accounts payable for most people) and credits my inventory value account $100

Once I receive the invoice I realize that the widget price was $8/widget.

I chnage the price on the invoice and then validate.

This credits my accounts payable for $80, and makes the entry for the difference of $20 in my price difference account.

HERE IS MY ISSUES:

Up until this point everything is good.

What I am missing is that after I receive the invoice and make the price adjustment, I then go back to my inventory valuation screen and it still shows my 10 widgets with a value of $100.

I need to inventory value to chnage to to $80 automatically once the price variance takes place...

I hope this helps explain my need.

Thank you

-John

Show quoted text


On Oct 5, 2016 1:38 PM, "John Pia Jr" <jpiajr@southmill.com> wrote:

Hello,

I am trying to figure out how to manage cost tier adjustments, also known as purchase price variance.

Situation:
Purchase order created for 10 widgets valued at $10 per widget.

10 widgets are received. At this time the value of my inventory goes up by $100.

A week later we received the invoice and see that the widgets were only $9 each

Before I validate the invoice I would like to change the cost to $9 per widget bringing my invoice total down to $90.

Once I validate the invoice I need the inventory value to be adjusted from $100, down to $90 I also need to make the adjustment on record in my purchase variance account.

Basically I need to create a journal entry to the inventory account if there is a price variance between the original purchase order and the invoice price.

I believe this is a fairly common task.

Would this be handled with a return?