Why my purchase partially allocated to Cost of Sales account in the journal??

[Shunya]

Hi, it is my understanding that once a purchase with item code was entered all price for the purchase should be allocated to an asset account (account #1-XXXX) as inventory. That is how we set up our item code.

However, I have seen many times that some of the price (actually more than $10k) was automatically allocated into a cost-of-sales account (account #5-XXXX) so we would like to know why has this strange journal was made on MYOB. Please see the attached extract copy from my screen.

Can somene please help us solving the problem so this will no longer happen. 

[Komal_S]

Hi @Shunya 

Welcome to the Community Forum!

You're correct in mentioning that recording purchases should add value to the inventory asset account. As a different situation is occurring for some items in your file, we would need to see the actual purchase that was entered for them and also a recap of that purchase (Ctrl+R). If the values are showing correctly in the recap, but incorrect in the journal, try re-entering the purchase and let us know if that makes a difference.

If not, please attach the screenshots of the purchase transaction, its recap window, and also confirm if the transaction was entered as an order at some stage and then converted to a bill. 

[Mike_James]

Hi @Shunya , does your purchasing procedure go from purchase order to receive item to bill?

And do you sell out received stock before the bill arrives, and your purchase order is not accurately priced?

In this situation, Accountright will create cost of sale adjustments for sales made when costs were inaccurate, and unlike v19 when separate inventory adjustments were created, the adjustments are now added to the original purchase journal,  which means that the journal no longer matches the purchase on screen.  The adjustments are also unauditable.

Your purchase journal suggests to me that such adjustments have been occurring.

If you still wish to use receive items, then the only way to prevent major adjustments is to price your purchase orders accurately.

[Shunya]

Hi Mike, thank you very much for your reply for my post.

1. We would enter this kind of purchase from Bill rather than from Order or Receive Item.

2. To save our working time rather than entering purchase every day we would enter this type of purchase with larger amount at a time in a month. Bofore entering the final priced purchase we would also have to enter a tentative purchase with tentative price and then enter a reverse entry.

Do you think the way of entering the purchase as above is causing the issue of inaccurate cost of sales price in the journal? If so what is the best way for us to enter the purchase so MYOB will no longer cause the same issue?

Should we just enter a purchase every day from Receive Item and then convert to Bill when we received an actual invoice from supplier?

I am sorry to be a pain but if you can answer for me that would be really great.

[Steven_M · Accepted solution]

Hi @Shunya 

Updating the price on a bill after the fact will cause the cost of sales value to show on the Bill when it typically would not show. This caused by the fact that the system re-calculates the average cost for that item and then redraws that cost of sales amount.

Based on my testing, it does look like it works out the appropriate value with the calculation sold being:

Purchase Cost of Sale amount = (Purchase cost per unit - Average Cost) x Quantity Sold.

Although, long term for that item, updating the bill after selling those items is not something that I would recommend for users. While it is likely and does appear to calculate the desired amount when that item is sold, it may have lasting long-term impacts, especially if the item is being sold in chunks. The recommendation if you have received items without a supplier bill then Help Article: Recording items received without a supplier bill would be the recommendation.

[Shunya]

Thank you very much, Steven!!