[IMP] inventory: expand on accounting and math
closes odoo/documentation#4005 Signed-off-by: Zachary Straub (zst) <zst@odoo.com> Co-authored-by: toaa <104567387+toaa-odoo@users.noreply.github.com> Co-authored-by: meng-odoo <101904966+meng-odoo@users.noreply.github.com>
This commit is contained in:
Felicious
parent
e5d4438e0d
commit
058515ee91
@ -1,167 +1,439 @@
|
||||
==========================================================
|
||||
Impact on the average price valuation when returning goods
|
||||
==========================================================
|
||||
===============================
|
||||
Average price on returned goods
|
||||
===============================
|
||||
|
||||
As stated in the `*inventory valuation
|
||||
page* <https://www.odoo.com/documentation/functional/valuation.html>`__,
|
||||
one of the possible costing method you can use in perpetual stock
|
||||
valuation, is the average cost.
|
||||
.. |AVCO| replace:: :abbr:`AVCO (Average Cost Valuation)`
|
||||
|
||||
This document answers to one recurrent question for companies using that
|
||||
method to make their stock valuation: how does a shipping returned to
|
||||
its supplier impact the average cost and the accounting entries? This
|
||||
document is **only** for the specific use case of a perpetual valuation (as
|
||||
opposed to the periodic one) and in average price costing method (as
|
||||
opposed to standard of FIFO).
|
||||
.. _inventory/avg_cost/definition:
|
||||
|
||||
Definition of average cost
|
||||
==========================
|
||||
*Average cost valuation* (AVCO) is an inventory valuation method that evaluates cost based on the
|
||||
total cost of goods bought or produced during a period, divided by the total number of items
|
||||
on-hand. Inventory valuation is used to:
|
||||
|
||||
The average cost method calculates the cost of ending inventory and cost
|
||||
of goods sold on the basis of weighted average cost per unit of
|
||||
inventory.
|
||||
- reflect the value of a company's assets;
|
||||
- keep track of the amount of unsold goods;
|
||||
- account for monetary value in goods that have yet to generate profit;
|
||||
- report on flow of goods throughout the quarter.
|
||||
|
||||
The weighted average cost per unit is calculated using the following
|
||||
formula:
|
||||
Because |AVCO| uses the weighted average to evaluate the cost, it is a good fit for companies that
|
||||
sell only a few different products in large quantities. In Odoo, this costing analysis is
|
||||
*automatically updated* each time products are received.
|
||||
|
||||
- When new products arrive in a warehouse, the new average cost is
|
||||
recomputed as:
|
||||
Thus, when shipments are returned to their supplier, Odoo automatically generates accounting entries
|
||||
to reflect the change in inventory valuation. However, Odoo does **not** automatically update the
|
||||
|AVCO| calculation, because :ref:`this can potentially create inconsistencies with inventory
|
||||
valuation <inventory/avg_price/leaving_inventory>`.
|
||||
|
||||
.. image:: avg_price_valuation/avg01.png
|
||||
.. note::
|
||||
This document addresses a specific use case for theoretical purposes. Navigate :ref:`here
|
||||
<inventory/inventory_valuation_config>` for instructions on how to set up and use |AVCO| in Odoo.
|
||||
|
||||
.. seealso::
|
||||
- :ref:`Using inventory valuation <inventory/reporting/using_inventory_val>`
|
||||
- :ref:`Other inventory valuation methods <inventory/inventory_valuation_config/costing_methods>`
|
||||
|
||||
Configuration
|
||||
=============
|
||||
|
||||
To use average cost inventory valuation on a product, navigate to :menuselection:`Inventory -->
|
||||
Configuration --> Product Categories` and select the category that will be using |AVCO|. On the
|
||||
product category page, set :guilabel:`Costing Method` to `Average Cost (AVCO)` and
|
||||
:guilabel:`Inventory Valuation` to `Automated`.
|
||||
|
||||
.. seealso::
|
||||
:ref:`Inventory valuation configuration <inventory/inventory_valuation_config>`
|
||||
|
||||
Using average cost valuation
|
||||
============================
|
||||
|
||||
The average cost method adjusts the inventory valuation when products are received in the warehouse.
|
||||
This section explains how it works, but if the explanation is unnecessary, skip to the :ref:`return
|
||||
to supplier use case <inventory/avg_cost/return>` section.
|
||||
|
||||
.. _inventory/avg_cost/formula:
|
||||
|
||||
Formula
|
||||
-------
|
||||
|
||||
When new products arrive, the new average cost for each product is recomputed using the formula:
|
||||
|
||||
.. math::
|
||||
Avg~Cost = \frac{(Old~Qty \times Old~Avg~Cost) + (Incoming~Qty \times Purchase~Price)}{Final~Qty}
|
||||
|
||||
- **Old Qty**: product count in stock before receiving the new shipment;
|
||||
- **Old Avg Cost**: calculated average cost for a single product from the previous inventory
|
||||
valuation;
|
||||
- **Incoming Qty**: count of products arriving in the new shipment;
|
||||
- **Purchase Price**: estimated price of products at the reception of products (since vendor bills
|
||||
may arrive later). The amount includes not only the price for the products, but also added costs,
|
||||
such as shipping, taxes, and :ref:`landed costs <inventory/reporting/landed_costs>`. At reception
|
||||
of the vendor bill, this price is adjusted;
|
||||
- **Final Qty**: quantity of on-hand stock after the stock move.
|
||||
|
||||
.. _inventory/avg_cost/definite_rule:
|
||||
|
||||
.. important::
|
||||
When products leave the warehouse, the average cost **does not** change. Read about why the
|
||||
average cost valuation is **not** adjusted :ref:`here <inventory/avg_price/leaving_inventory>`.
|
||||
|
||||
.. _inventory/avg_cost/math_table:
|
||||
|
||||
Compute average cost
|
||||
--------------------
|
||||
|
||||
To understand how the average cost of a product changes with each shipment, consider the following
|
||||
table of warehouse operations and stock moves. Each is a different example of how the average cost
|
||||
valuation is affected.
|
||||
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Incoming Value| Inventory Value | Qty On Hand | Avg Cost |
|
||||
+================================+===============+===================+===============+============+
|
||||
| | | $0 | 0 | $0 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Receive 8 tables at $10/unit | 8 * $10 | $80 | 8 | $10 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Receive 4 tables at $16/unit | 4 * $16 | $144 | 12 | $12 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Deliver 10 tables | -10 * $12 | $24 | 2 | $12 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
|
||||
.. _inventory/avg_cost/ex-1:
|
||||
|
||||
.. exercise::
|
||||
Ensure comprehension of the above computations by reviewing the "Receive 8 tables at $10/unit"
|
||||
example.
|
||||
|
||||
Initially, the product stock is 0, so all values are $0.
|
||||
|
||||
In the first warehouse operation, `8` tables are received at `$10` each. The average cost is
|
||||
calculated using the :ref:`formula <inventory/avg_cost/formula>`:
|
||||
|
||||
.. math::
|
||||
Avg~Cost = \frac{0 + 8 \times $10}{8} = \frac{$80}{8} = $10
|
||||
|
||||
- Since the *incoming quantity* of tables is `8` and the *purchase price* for each is `$10`,
|
||||
- The inventory value in the numerator is evaluated to `$80`;
|
||||
- `$80` is divided by the total amount of tables to store, `8`;
|
||||
- `$10` is the average cost of a single table from the first shipment.
|
||||
|
||||
To verify this in Odoo, in the *Purchase* app, order `8` quantities of a new product, `Table`,
|
||||
with no previous stock moves, for `$10` each.
|
||||
|
||||
In the table's :guilabel:`Product Category` field in the :guilabel:`General Information` tab of
|
||||
the product form, click the :guilabel:`➡️ (arrow)` icon, to open an :guilabel:`External Link` to
|
||||
edit the product category. Set the :guilabel:`Costing Method` to `Average Cost (AVCO)` and
|
||||
:guilabel:`Inventory Valuation` to `Automated`.
|
||||
|
||||
Then, return to the purchase order. Click :guilabel:`Confirm Order`, and click :guilabel:`Receive
|
||||
Products` to confirm receipt.
|
||||
|
||||
Next, check the inventory valuation record generated by the product reception by navigating to
|
||||
:menuselection:`Inventory --> Reporting --> Inventory Valuation`. Select the drop-down for
|
||||
`Table`, and view the :guilabel:`Total Value` column for the *valuation layer* (:dfn:`inventory
|
||||
valuation at a specific point in time = on-hand quantity * unit price`). The 8 tables in-stock
|
||||
are worth $80.
|
||||
|
||||
.. image:: avg_price_valuation/inventory-val-8-tables.png
|
||||
:align: center
|
||||
:alt: Show inventory valuation of 8 tables in Odoo.
|
||||
|
||||
.. tip::
|
||||
When the product category's :guilabel:`Costing Method` is set to :guilabel:`AVCO`, then the
|
||||
average cost of a product is also displayed on the :guilabel:`Cost` field, under the
|
||||
:guilabel:`General Information` tab, on the product page itself.
|
||||
|
||||
Product delivery (use case)
|
||||
~~~~~~~~~~~~~~~~~~~~~~~~~~~
|
||||
|
||||
For outgoing shipments, :ref:`outbound products have no effect on the average cost valuation
|
||||
<inventory/avg_cost/definite_rule>`. Although the average cost valuation is not recalculated, the
|
||||
inventory value still decreases because the product is removed from stock and delivered to the
|
||||
customer location.
|
||||
|
||||
.. exercise::
|
||||
To demonstrate that the average cost valuation is not recalculated, examine the "Deliver 10
|
||||
tables" example.
|
||||
|
||||
.. math::
|
||||
Avg~Cost = \frac{12 \times $12 + (-10) \times $12}{12-10} = \frac{24}{2} = $12
|
||||
|
||||
#. Because 10 tables are being sent out to customers, the *incoming quantity* is `-10`. The
|
||||
previous average cost (`$12`) is used in lieu of a vendor's *purchase price*;
|
||||
#. The *incoming inventory value* is `-10 * $12 = -$120`;
|
||||
#. The old *inventory value* (`$144`) is added to the *incoming inventory value* (`-$120`), so
|
||||
`$144 + -$120 = $24`;
|
||||
#. Only `2` tables remain after shipping out `10` tables from `12`. So the current *inventory
|
||||
value* (`$24`) is divided by the on-hand quantity (`2`);
|
||||
#. `$24 / 2 = $12`, which is the same average cost as the previous operation.
|
||||
|
||||
To verify this in Odoo, sell `10` tables in the *Sales* app, validate the delivery, and then
|
||||
review the inventory valuation record by going to in :menuselection:`Inventory --> Reporting -->
|
||||
Inventory Valuation`. In the topmost valuation layer, delivering `10` tables reduces the
|
||||
product's value by `-$120`.
|
||||
|
||||
**Note**: What is not represented in this stock valuation record is the revenue made from this
|
||||
sale, so this decrease is not a loss to the company.
|
||||
|
||||
.. image:: avg_price_valuation/inventory-val-send-10-tables.png
|
||||
:align: center
|
||||
:alt: Show how deliveries decrease inventory valuation.
|
||||
|
||||
.. _inventory/avg_cost/return:
|
||||
|
||||
Return items to supplier (use case)
|
||||
===================================
|
||||
|
||||
Because the price paid to suppliers can differ from the price the product is valued at with the
|
||||
|AVCO| method, Odoo handles returned items in a specific way.
|
||||
|
||||
#. Products are returned to suppliers at the original purchase price, but;
|
||||
#. The internal cost valuation remains unchanged.
|
||||
|
||||
The above :ref:`example table <inventory/avg_cost/math_table>` is updated as follows:
|
||||
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Qty*Avg Cost | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+================================+===============+===================+===============+============+
|
||||
| | | $24 | 2 | $12 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Return 1 table bought at $10 | -1 * $12 | $12 | 1 | $12 |
|
||||
+--------------------------------+---------------+-------------------+---------------+------------+
|
||||
|
||||
In other words, returns to vendors are perceived by Odoo as another form of a product exiting the
|
||||
warehouse. To Odoo, because the table is valued at $12 per unit, the inventory value is reduced by
|
||||
`$12` when the product is returned; the initial purchase price of `$10` is unrelated to the table's
|
||||
average cost.
|
||||
|
||||
.. example::
|
||||
To return a single table that was purchased for `$10`, navigate to the receipt in the *Inventory*
|
||||
app for the :ref:`8 tables purchased in Exercise 1 <inventory/avg_cost/ex-1>` by going to the
|
||||
:guilabel:`Inventory Overview`, clicking on :guilabel:`Receipts`, and selecting the desired
|
||||
receipt.
|
||||
|
||||
Then, click :guilabel:`Return` on the validated delivery order, and modify the quantity to `1` in
|
||||
the reverse transfer window. This creates an outgoing shipment for the table. Select
|
||||
:guilabel:`Validate` to confirm the outgoing shipment.
|
||||
|
||||
Return to :menuselection:`Inventory --> Reporting --> Inventory Valuation` to see how the
|
||||
outgoing shipment decreases the inventory value by $12.
|
||||
|
||||
.. image:: avg_price_valuation/inventory-valuation-return.png
|
||||
:align: center
|
||||
:alt: Inventory valuation for return.
|
||||
|
||||
.. _inventory/avg_price/leaving_inventory:
|
||||
|
||||
Eliminate stock valuation errors in outgoing products
|
||||
-----------------------------------------------------
|
||||
|
||||
Inconsistencies can occur in a company's inventory when the average cost valuation is recalculated
|
||||
on outgoing shipments.
|
||||
|
||||
To demonstrate this error, the table below displays a scenario in which 1 table is shipped to a
|
||||
customer and another is returned to a supplier at the purchased price.
|
||||
|
||||
+------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Qty*Price | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+==========================================+===============+===================+===============+============+
|
||||
| | | $24 | 2 | $12 |
|
||||
+------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Ship 1 product to customer | -1 \* $12 | $12 | 1 | $12 |
|
||||
+------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Return 1 product initially bought at $10 | -1 \* $10 | **$2** | **0** | $12 |
|
||||
+------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
|
||||
In the final operation above, the final inventory valuation for the table is `$2` even though there
|
||||
are `0` tables left in stock.
|
||||
|
||||
.. admonition:: Correct method
|
||||
|
||||
Use the average cost to value the return. This does not mean the company gets $12 back for a $10
|
||||
purchase; the item returned for $10 is valued internally at $12. The inventory value change
|
||||
represents a product worth $12 no longer being accounted for in company assets.
|
||||
|
||||
Anglo-Saxon accounting
|
||||
======================
|
||||
|
||||
In addition to using |AVCO|, companies that use **Anglo-Saxon accounting** also keep a holding
|
||||
account that tracks the amount to be paid to vendors. Once a vendor delivers an order, **inventory
|
||||
value** increases based on the vendor price of the products that have entered the stock. The holding
|
||||
account (called **stock input**) is credited and only reconciled once the vendor bill is received.
|
||||
|
||||
.. seealso::
|
||||
- :ref:`Anglo-Saxon vs. Continental <inventory/inventory_valuation_config/accounting>`
|
||||
|
||||
The table below reflects journal entries and accounts. The *stock input* account stores the money
|
||||
intended to pay vendors when the vendor bill has not yet been received. To balance accounts when
|
||||
returning products that have a price difference between the price the product is **valued at** and
|
||||
the price it was bought for, a *price difference* account is created.
|
||||
|
||||
.. _inventory/avg_price/price-table:
|
||||
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Operation | Stock Input | Price Diff | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+=========================================+===============+==============+===================+===============+============+
|
||||
| | | | $0 | 0 | $0 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive 8 tables at $10 | ($80) | | $80 | 8 | $10 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor bill $80 | $0 | | $80 | 8 | $10 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive 4 tables at $16 | ($64) | | $144 | 12 | $12 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor bill $64 | $0 | | $144 | 12 | $12 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Deliver 10 tables to customer | $0 | | $24 | 2 | $12 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Return 1 table initially bought at $10 | **$10** | **$2** | **$12** | 1 | $12 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor refund $10 | $0 | $2 | $12 | 1 | $12 |
|
||||
+-----------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
|
||||
Product reception
|
||||
-----------------
|
||||
|
||||
Summary
|
||||
~~~~~~~
|
||||
|
||||
At product reception, Odoo ensures companies can pay for goods that were purchased by preemptively
|
||||
moving an amount matching the price of received goods into the :doc:`liability account
|
||||
</applications/finance/accounting/getting_started/cheat_sheet>`, **Stock Input**. Then, once the
|
||||
bill has been received, the amount in the holding account is transferred to *Accounts Payable*.
|
||||
Transfers into this account means the bill has been paid. **Stock Input** is reconciled once the
|
||||
vendor bill is received.
|
||||
|
||||
Inventory valuation is a method of calculating how much each in-stock product is worth internally.
|
||||
Since there is a difference between the price the product is **valuated at** and the price the
|
||||
product was actually **purchased for**, the **Inventory Valuation** account is unrelated to the
|
||||
crediting and debiting operations of the **Stock Input** account.
|
||||
|
||||
To conceptualize all this, follow the breakdown below.
|
||||
|
||||
Accounts balanced at received products
|
||||
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
|
||||
|
||||
In this example, a company starts with zero units of a product, `table`, in stock. Then, 8 tables
|
||||
are received from the vendor:
|
||||
|
||||
#. The **Stock Input** account stores `$80` of credit owed to the vendor. The amount in this account
|
||||
is unrelated to the inventory value.
|
||||
#. `$80` worth of tables came **in** (**debit** the *Inventory Value* account `$80`), and
|
||||
#. `$80` must be paid **out** for received goods (**credit** the *Stock Input* account `$80`).
|
||||
|
||||
In Odoo
|
||||
*******
|
||||
|
||||
Odoo generates an accounting journal entry when shipments that use |AVCO| costing method are
|
||||
received. Configure a :guilabel:`Price Difference Account` by selecting the :guilabel:`➡️ (arrow)`
|
||||
icon next to the :guilabel:`Product Category` field on the product page.
|
||||
|
||||
Under :guilabel:`Account Properties`, create a new :guilabel:`Price Difference Account` by typing in
|
||||
the name of the account and clicking :guilabel:`Create and Edit`. Then set the account
|
||||
:guilabel:`Type` as `Expenses`, and click :guilabel:`Save`.
|
||||
|
||||
.. image:: avg_price_valuation/create-price-difference.png
|
||||
:align: center
|
||||
:alt: Create price difference account.
|
||||
|
||||
- When products leave the warehouse: the average cost **does not** change
|
||||
Then, receive the shipment in the *Purchase* app or *Inventory* app, and navigate to the
|
||||
:menuselection:`Accounting app --> Accounting --> Journal Entries`. In the list, find the
|
||||
:guilabel:`Reference` that matches the warehouse reception operation for the relevant product.
|
||||
|
||||
Defining the purchase price
|
||||
---------------------------
|
||||
.. image:: avg_price_valuation/search-for-entry-of-tables.png
|
||||
:align: center
|
||||
:alt: Show accounting entry of 8 tables from the list.
|
||||
|
||||
The purchase price is estimated at the reception of the products (you
|
||||
might not have received the vendor bill yet) and reevaluated at the
|
||||
reception of the vendor bill. The purchase price includes the cost you
|
||||
pay for the products, but it may also includes additional costs, like
|
||||
landed costs.
|
||||
Click on the line for 8 tables. This accounting journal entry shows that when the 8 tables were
|
||||
received, the `Stock Valuation` account increased by `$80`. Conversely, the **Stock Input** account
|
||||
(set as `Stock Interim (Received)` account by default) is credited `$80`.
|
||||
|
||||
Average cost example
|
||||
====================
|
||||
.. image:: avg_price_valuation/accounting-entry-8-tables.png
|
||||
:align: center
|
||||
:alt: Debit stock valuation and credit stock input 80 dollars.
|
||||
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Delta Value | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+=============================+===============+===================+===============+============+
|
||||
| | | $0 | 0 | $0 |
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
| Receive 8 Products at $10 | +8\*$10 | $80 | 8 | $10 |
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
| Receive 4 Products at $16 | +4\*$16 | $144 | 12 | $12 |
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
| Deliver 10 Products | -10\*$12 | $24 | 2 | $12 |
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
+-----------------------------+---------------+-------------------+---------------+------------+
|
||||
Accounts balanced at received vendor bill
|
||||
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
|
||||
|
||||
At the beginning, the Avg Cost is set to 0 set as there is no product in
|
||||
the inventory. When the first reception is made, the average cost
|
||||
becomes logically the purchase price.
|
||||
In this example, a company starts with zero units of a product, table, in stock. Then, 8 tables are
|
||||
received from the vendor. When the bill is received from vendor for 8 tables:
|
||||
|
||||
At the second reception, the average cost is updated because the total
|
||||
inventory value is now ``$80 + 4*$16 = $144``. As we have 12 units on
|
||||
hand, the average price per unit is ``$144 / 12 = $12``.
|
||||
#. Use `$80` in the **Stock Input** account to pay the bill. This cancels out and the account now
|
||||
holds `$0`.
|
||||
#. Debit **Stock Input** `$80` (to reconcile this account).
|
||||
#. Credit **Accounts payable** `$80`. This account stores the amount the company owes others, so
|
||||
accountants use the amount to write checks to vendors.
|
||||
|
||||
By definition, the delivery of 10 products does not change the average
|
||||
cost. Indeed, the inventory value is now $24 as we have only 2 units
|
||||
remaining of each ``$24 / 2 = $12``.
|
||||
In Odoo
|
||||
*******
|
||||
|
||||
Purchase return use case
|
||||
========================
|
||||
Once the vendor requests payment, navigate to the :menuselection:`Purchase app --> Orders -->
|
||||
Purchase` and select the :abbr:`PO (Purchase Order)` for 8 tables. Inside the :abbr:`PO (Purchase
|
||||
Order)`, select :guilabel:`Create Bill`.
|
||||
|
||||
In case of a product returned to its supplier after reception, the
|
||||
inventory value is reduced using the average cost formulae (not at the
|
||||
initial price of these products!).
|
||||
Switch to the :guilabel:`Journal Items` tab to view how `$80` is transferred from the holding
|
||||
account, `Stock Interim (Received)` to `Accounts Payable`. :guilabel:`Confirm` the bill to record
|
||||
the payment to the vendor.
|
||||
|
||||
Which means that the above table will be updated as follow:
|
||||
.. image:: avg_price_valuation/receive-8-table-bill.png
|
||||
:align: center
|
||||
:alt: Show bill linked to the purchase order for 8 tables.
|
||||
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Delta Value | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+===============================================+===============+===================+===============+============+
|
||||
| | | $24 | 2 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Return of 1 Product initially bought at $10 | -1\*$12 | $12 | 1 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
On product delivery
|
||||
-------------------
|
||||
|
||||
Explanation: counter example
|
||||
----------------------------
|
||||
In the :ref:`above example table <inventory/avg_price/price-table>`, when 10 products are delivered
|
||||
to a customer, the **Stock Input** account is untouched because there are no new products coming in.
|
||||
To put it simply:
|
||||
|
||||
Remember the definition of **Average Cost**, saying that we do not update
|
||||
the average cost of a product leaving the inventory. If you break this
|
||||
rule, you may lead to inconsistencies in your inventory.
|
||||
#. **Inventory valuation** is credited `$120`. Subtracting from inventory valuation represents
|
||||
`$120` worth of products exiting the company.
|
||||
#. Debit **Accounts Receivable** to record revenue from the sale.
|
||||
|
||||
As an example, here is the scenario when you deliver one piece to the
|
||||
customer and return the other one to your supplier (at the cost you
|
||||
purchased it). Here is the operation:
|
||||
.. image:: avg_price_valuation/sell-10-tables.png
|
||||
:align: center
|
||||
:alt: Show journal items linked to sale order.
|
||||
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Delta Value | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+===============================================+===============+===================+===============+============+
|
||||
| | | $24 | 2 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Customer Shipping 1 product | -1\*$12 | $12 | 1 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Return of 1 Product initially bought at $10 | -1\*$10 | **$2** | **0** | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
.. spoiler:: Understand Anglo-Saxon expensing
|
||||
|
||||
As you can see in this example, this is not correct: an inventory
|
||||
valuation of $2 for 0 pieces in the warehouse.
|
||||
In the accounting journal entry invoicing a customer for 10 tables, the accounts **Product
|
||||
Sales**, **Tax Received**, and **Accounts Receivable** all pertain to the sale of the product.
|
||||
**Accounts Receivable** is the account where the customer payment will be received.
|
||||
|
||||
The correct scenario should be to return the goods at the current
|
||||
average cost:
|
||||
Anglo-Saxon accounting recognizes the cost of goods sold (COGS) once the sale is made. So, up
|
||||
until the product is sold, scrapped, or returned, costs of keeping the product in stock are not
|
||||
accounted for. The **Expense** account is debited `$120` to log the costs of storing 10 tables
|
||||
during this period of time.
|
||||
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Operation | Delta Value | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+===============================================+===============+===================+===============+============+
|
||||
| | | $24 | 2 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Customer Shipping 1 product | -1\*$12 | $12 | 1 | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
| Return of 1 Product initially bought at $10 | -1\*$12 | **$0** | **0** | $12 |
|
||||
+-----------------------------------------------+---------------+-------------------+---------------+------------+
|
||||
On product return
|
||||
-----------------
|
||||
|
||||
On the other hand, using the average cost to value the return ensure a
|
||||
correct inventory value at all times.
|
||||
In the :ref:`above example table <inventory/avg_price/price-table>`, when returning 1 product to a
|
||||
vendor purchased at `$10`, a company expects `$10` in the **Accounts Payable** account from the
|
||||
vendor. However, **Stock Input** account must be debited `$12` because the average cost is `$12` at
|
||||
the time of the return. The missing `$2` is accounted for in the :guilabel:`Price Difference
|
||||
Account`, which is set up in the product's :guilabel:`Product Category`.
|
||||
|
||||
Further thoughts on anglo saxon mode
|
||||
------------------------------------
|
||||
.. note::
|
||||
Behavior of *price difference accounts* varies from localization. In this case, the account is
|
||||
intended to store differences between vendor price and *automated* inventory valuation methods.
|
||||
|
||||
For people in using the **anglo saxon accounting** principles, there is
|
||||
another concept to take into account: the stock input account of the
|
||||
product, which is intended to hold at any time the value of vendor bills
|
||||
to receive. So the stock input account will increase on reception of
|
||||
incoming shipments and will decrease when receiving the related vendor
|
||||
bills.
|
||||
Summary:
|
||||
|
||||
Back to our example, we see that when the return is valued at the
|
||||
average price, the amount booked in the stock input account is the
|
||||
original purchase price:
|
||||
#. Debit **Stock Input** account `$10` to move the table from stock to stock input. This move is to
|
||||
indicate that the table is to be processed for an outgoing shipment.
|
||||
#. Debit **Stock Input** an additional `$2` to account for the **Price Difference**.
|
||||
#. Credit **Stock Valuation** `$12` because the item is leaving the stock.
|
||||
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Operation | stock input | price diff | Inventory Value | Qty On Hand | Avg Cost |
|
||||
+===============================================+===============+==============+===================+===============+============+
|
||||
| | | | $0 | 0 | $0 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive 8 Products at $10 | ($80) | | $80 | 8 | $10 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor bill $80 | $0 | | $80 | 8 | $10 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive 4 Products at $16 | ($64) | | $144 | 12 | $12 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor bill $64 | $0 | | $144 | 12 | $12 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Deliver 10 Products | $0 | | $24 | 2 | $12 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Return of 1 Product initially bought at $10 | **$10** | **$2** | **$12** | 1 | $12 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
| Receive vendor refund $10 | $0 | $2 | $12 | 1 | $12 |
|
||||
+-----------------------------------------------+---------------+--------------+-------------------+---------------+------------+
|
||||
.. image:: avg_price_valuation/expensing-price-difference-account.png
|
||||
:align: center
|
||||
:alt: 2 dollar difference expensed in Price Difference account.
|
||||
|
||||
This is because the vendor refund will be made using the original
|
||||
purchase price, so to zero out the effect of the return in the stock
|
||||
input in last operation, we need to reuse the original price. The price
|
||||
difference account located on the product category is used to book the
|
||||
difference between the average cost and the original purchase price.
|
||||
Once the vendor's refund is received,
|
||||
|
||||
#. Credit **Stock Input** account `$10` to reconcile the price of the table.
|
||||
#. Debit **Accounts Payable** `$10` to have the accountants collect and register the payment in
|
||||
their journal.
|
||||
|
||||
.. image:: avg_price_valuation/return-credit-note.png
|
||||
:align: center
|
||||
:alt: Return to get 10 dollars back.
|
||||
|
||||
Binary file not shown.
|
After Width: | Height: | Size: 19 KiB |
Binary file not shown.
|
Before Width: | Height: | Size: 3.0 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 5.3 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 29 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 16 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 13 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 16 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 29 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 30 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 20 KiB |
Binary file not shown.
|
After Width: | Height: | Size: 33 KiB |
@ -2,6 +2,8 @@
|
||||
Landed costs: add additional costs to products
|
||||
==============================================
|
||||
|
||||
.. _inventory/reporting/landed_costs:
|
||||
|
||||
When companies perform profit analyses, the data being examined must be as accurate as possible. To
|
||||
ensure that, **all** costs and expenses need to be accounted for, including the sum of expenses
|
||||
associated with shipping a product, which is also known as *landed costs*.
|
||||
|
||||
@ -29,6 +29,8 @@ between locations in a company's inventory.
|
||||
need to be periodically checked to ensure accuracy, and adjustments may be needed on an ongoing
|
||||
basis depending on the needs and priorities of the business.
|
||||
|
||||
.. _inventory/inventory_valuation_config/accounting:
|
||||
|
||||
Types of accounting
|
||||
-------------------
|
||||
|
||||
@ -47,6 +49,8 @@ In *Continental* accounting, the cost of a good is reported as soon as a product
|
||||
stock. Additionally, a single *Expense* account is used for both input and output accounts in
|
||||
the balance sheet.
|
||||
|
||||
.. _inventory/inventory_valuation_config/costing_methods:
|
||||
|
||||
Costing methods
|
||||
---------------
|
||||
|
||||
@ -86,8 +90,7 @@ menu (e.g. :guilabel:`Standard`, :guilabel:`Average Cost (AVCO)`, or :guilabel:`
|
||||
(FIFO)`) and switch the :guilabel:`Inventory Valuation` to :guilabel:`Automated`.
|
||||
|
||||
.. seealso::
|
||||
:doc:`Using the inventory valuation
|
||||
</applications/inventory_and_mrp/inventory/management/reporting/using_inventory_valuation>`
|
||||
:ref:`Using the inventory valuation<inventory/reporting/using_inventory_val>`
|
||||
|
||||
.. note::
|
||||
When choosing :guilabel:`Average Cost (AVCO)` as the :guilabel:`Costing Method`, changing the
|
||||
|
||||
@ -2,6 +2,8 @@
|
||||
Using inventory valuation
|
||||
=========================
|
||||
|
||||
.. _inventory/reporting/using_inventory_val:
|
||||
|
||||
*Inventory valuation* is a quintessential accounting procedure that calculates the value of on-hand
|
||||
stock. Once determined, the inventory valuation amount is then incorporated into a company's overall
|
||||
value.
|
||||
@ -10,7 +12,7 @@ In Odoo, this process can be conducted manually— by warehouse employees physic
|
||||
products— or automatically through the database.
|
||||
|
||||
.. seealso::
|
||||
:ref:`Inventory valuation configuration <inventory/inventory_valuation_config>`
|
||||
:ref:`Inventory valuation configuration<inventory/inventory_valuation_config>`
|
||||
|
||||
Understand the basics of inventory valuation
|
||||
============================================
|
||||
|
||||
Loading…
Reference in New Issue
Block a user