I created a Sales Invoice and a Credit Notes (to record customer return) from the invoice. As far as I know, Credit Notes must not affect the returned Inventory Item Average Cost in Inventory Items (CMIIW). But what happened is, the Average Cost is recalculated.
Here is the Inventory Item Average Cost for the item with code NPK-JTW before I created the Credit Note
I think the average cost changed because there was a purchase made for this specific item between the time of issuing sales invoice and time of creation of credit note.
Aaah, I never think of that one possible cause (purchase occured between the time of the invoice issued date and the credit note date).
I’ll chek if there are any purchase occured between the invoice issued date and the credit note date. There is a big chance that this is the cause since the invoice date is few months in the past. Thank you for helping @steigen
After some investigation, it turns out that the change on inventory item average cost wasn’t caused by purchase between the issued date of a sales invoice and the credit notes itself, but by the following conditions:
Start date at any point in time
Sales invoice with issued date earlier than the start date
Credit note with issued date later than the start date
With the above conditions are fulfilled, even if there are no purchases occurred between Sales Invoice and Credit Note, inventory item cost will be recalculated.
I don’t know if this is a bug or this is actually an expected behavior of manager. CC @lubos
This sounds correct. Pre-start date sales invoices only establish the starting balance of Accounts receivable. Average cost is set another way.
You have not presented a complete narrative that shows any problem. You have provided bits and pieces without describing the connections. So it really isn’t possible to know what you think is wrong.
I’m sorry if there is too little information, let me explain it in a more detailed explanation. I helped my friend to do the initial set on manager cloud for his fertilizer selling business. But for simplicity, I will explain this with an arbitrary business.
The business has been running for a couple of months, I set September 1st, 2019, as the start date and fill the appropriate starting balance for every account based on the data my friend provided. The business has some Sales Invoices with an issued date before the start date (August 1, 2019). Here is the balance sheet look like after initial set up
A couple of days after the start date, the customer that bought the Tire want to return the Tire that he just bought. And here is what the balance sheet looks like after the return happened (Credit Note created)
What I think is wrong about that is, the amount ofInventory on hand after Credit Note is created doesn’t change, while actually I have more tire in the inventory because of the return from the customer. Should the amount of Inventory on hand be increased by the dollar equivalent amount of the Tire that was returned (950 Tire x USD 200 / Tire = USD 190.000)? I mean the Inventory on hand amount in the balance sheet is somehow misleading me to think that I only have Tire worth USD 200.000, while it is actually worth USD 390.000
My questions are:
Is this just how manager work and there’s nothing wrong with the above behavior?
If this is just how manager work, what should I do in order to make Inventory on hand reflect the most appropriate value when I have Sales Invoice before the start date and Credit Note from the Invoice after the start date
P.S: I don’t have any Accounting background, so correct me if I’m wrong. Also, I’m a non-native English speaker, sorry for any grammatical error
@ahmadmusair_3593, that is an excellent illustration and explanation. I can duplicate this problem and am moving the topic to the Bugs category.
@lubos, what happens is that Accounts receivable is properly credited by the credit note. But Inventory on hand and Inventory - cost are credited and debited respectively for zero amounts, even though there is a non-zero average cost for the inventory item at the moment the credit note is created. The transaction is posted to the two accounts, but at zero amounts. This occurs whether or not the credit note is specifically designated for a pre-start date sales invoice.
I can think of no reason the program should treat a credit note differently in this situation, just because there is a pre-start date sales invoice for the customer.
I also have not tested to see if the same problem occurs for debit notes, but I suspect it might, given their parallel structure.
Let me explain why it was happening and what I changed to fix this. First of all, to reproduce this issue, you don’t even need sales invoice. Just credit note is enough.
When you do customer return using credit note, Manager will look at the past cost of goods sold transactions to figure out the cost of returned item.
However, if you start new business on Manager and there are no “cost of goods sold” transactions yet, Manager will not know the cost price of previously sold items and thus will assume zero cost.
Imagine moving existing business on Manager. Zero inventory items starting balance and your first transaction is customer return. Manager simply doesn’t have the information to know what cost to bring back to inventory on hand.
To fix this, the latest version will use Average cost figure in the starting balance form for inventory item as a substitute if the cost cannot be calculated from previous transactions. So the average cost should be entered even if starting quantity on hand is zero. I will probably have to find better place for this eventually.
