Expensing of inventory costs.
Hi Readers,
In this post, I will explore how you can expense inventory (consumables) on purchase and maintain the stock count for internal issues.
I will use an item called Box Files below.
From our previous posting we noted that wehn a P.O is posted, the following transactions happen:
| Account | Debit | Credit |
| On posting of the purchase invoice | ||
| Purchases Account (Picked from the Purchases Account in the Gen Prod. Posting Setup of the item) | XXX | |
| Accounts Payable (Picked from the Payables Account in the Vendor Posting Group of the vendor) | XXX | |
| After running of adjust cost/post cost function | ||
| Inventory Account (Picked from the Inventory Account in the Inventory Posting Setup of the item) | XXX | |
| Direct Cost Applied Account (Picked from the Direct Cost Applied Account in the Gen Prod. Posting Setup of the item) | XXX | |
If we are expensing our items, we might need to avoid the second part of the transaction that is done by the adjust cost/post cost function. So how do we do that?
In the item card, we have a hidden field called Inventory Value Zero. This field allows us to only record increases/ decreases in quantity ( item ledger entries ) but record zero value ( value entries ) despite the transaction having a value e.g in a purchase order
By turning the checkbox above on, the purchase transaction will now be as below:
| Account | Debit | Credit |
| On posting of the purchase invoice | ||
| Purchases Account (Picked from the Purchases Account in the Gen Prod. Posting Setup of the item) | XXX | |
| Accounts Payable (Picked from the Payables Account in the Vendor Posting Group of the vendor) | XXX |
So now we can place our expense account in the purchase account in the Gen. Posting Setup.
I will raise my PO and preview it.
The item ledger entries and value entries are as below
Issuing out stock
To issue out stock , you can use inventory shipment document as shown below.
On posting the inventory shipment, stock will be deducted with no effect on the chart of accounts as there is no cost. See the item ledger & value entries below
This marks the end of the post.