Good receipts vs. Purchase orders vs. Items write-offs

I would like to have some help in understanding how Good Receipts can affect the Cost of Goods Sold.

The example is: I have a Purchase Invoice from a supplier who has shipped their items to me. Let’s say 10 glasses. When the glasses arrive I see that 2 are broken or missing. The supplier might send me a Credit Note but in any case that doesn’t happen I have to pay for 10 pieces but receive in my stock only 8 pieces. This means that my cost per piece for this shipment goes up.

If I have a Purchase Invoice in Manager for 10 and then copy that to a Goods Receipt with only 8, will Manager automatically recalculate the cost of those 8 pieces? Or do I need to receive the 10 piece and add an Item write-off for the 2 broken glasses?

There is also a more complicated example. The items might attract duties. Therefore when they arrive customs might or might not see the damaged pieces. In the unfortunate case they don’t see it, we pay duties on the broken pieces, hence we have a Purchase Invoice for 10, a Good Receipt for 10 and a Write-Off for 2. But if we see the broken items and we do not pay duties on them, we are in a situation like the previous one, though a Write-off here would reduce the stock value for 2/10 of the Purchase invoice and 2/8 of the total taxws paid. Correct? Is there a way to have the Write-off only to account for the 2/10 of the Purchase Invoice?

You have combined quite a lot of questions into your post.

Let’s start with the idea that if goods arrive broken, you should get a credit note from your supplier, not write anything off. The credit note will reduce the quantity in inventory and adjust the average cost as required.

If you are using goods receipts, the items are not added to inventory until your receive them, so the average cost, once again, is properly computed by Manager. No matter how many you ordered or are on the purchase invoice, only receive the unbroken ones.

Duties need to be sorted out based on when you notice the breakage. That should be a simple refund claim, depending on local procedures, backed up by the credit note from your supplier. There is nothing in your scenario that suggests a write-off is appropriate. A write-off would be used if items were broken in your own warehouse after receiving them.

Hi @Tut. Thank you for the feedback.

True, but sometimes the value is not worth the pain of asking for a Credit Note. More importantly there is the case of lost/stolen items for which the insurance will not cover the cost, for example because the value of the demage is below the deductable value. In this case the cost of such loss has to be computed somewhere, and I think the best way is a write-off.

Does it mean that the avarage cost of an item doesn’t change until part or all the quantity of that item is received? I have a case right now where part of the stock is stored in a bonded warehouse (not received in Manager yet and no import taxes paid yet). But I have a purchase invoice for the whole stock (the one in a bonded warehouse and the one already cleared from customs and receved in our warehouse) and the purchase invoices has already been paid for. Does Manager compute the avarage cost of the item based on the cost of the cleared quantity (on which duties have been paid) plus the cost of the bonded quantity (which has not been received yet and whose cost is lower as duties haven’t been paid yet)? Or does Manager only uses the received quantity to calculate the average cost and ignores the quantity in the bonded warehouse not yet received?

Unfortunately here in Rwanda that doesn’t happen! If you pay, there is nothing much you can do about it.

Yes, because if you are using goods receipts, the items are not in Inventory on hand until the goods receipt is entered. Now, if you are not using goods receipt, Manager assumes you have it in stock as soon as the purchase invoice is entered.

So Goods Receipts are only used when they are activated in “Customize”? Could they be deactivated at this stage when we have already several of them in our database?

no. you cannot disable a tab when you have transactions in them.
you can delete all the transactions in the tab and then disable it.


I think I have an issue here with the above example. Based on my Excel calculations (which I use for pricing purposes before computing all data in Manager) the cost of the items should be at least 50% higher than what they are in Manager. And usually what I have in Excel and what I have in Manager are quite similar.

Any idea of where the issue could come from?

Basically for these items we have the following situation:

Cleared part of the stock: purchasing cost of goods, transport and import taxes are all in Manager and paid. Goods have been received.

Bonded part of the stock: purchasing cost of goods and transport are in Manager and paid, but not import taxes. Goods have not been received yet and the quantity appears in the column Quantity to receive.

I am wondering if transport and import taxes for the stock that has been cleared is spread over the whole stock, including the one that is still bonded. This would make the avarge cost lower as we don’t have yet a purchase invoice for import taxes.

I have no idea what your Excel spreadsheet shows, so I cannot speculate on differences. What I can tell you is that average cost of inventory takes into account costs properly added, such as transportation. But it does not include costs of goods not received.

Thanks @Tut

Yes I think we must have done something wrong and we have to recheck. Manager is always accurate in its calculations.

I have another question related to this, sorry for bothering you so much…

I started to use Manager in 2017. My main concern was again to get the right cost of goods in Manager as of January 1st 2017 based on the numbers from 2016. I calculated the avarage cost of each item for 2016 and added it to Manager together with the initial quantity on hand. However, at the end of 2016 we still had to pay 3 purchase invoices in forex related to the items. Therefore I added 3 seprarate purchase invoice for each supplier dated in 2016 with just the total amount due and by using a random item (in a previous post I found out that this would not change the quantity of that item as the starting date in January 1st 2017). But now I am wondering if this was the right way to do it because those payments were made with a much higher exchange rate, hence the initail avarage cost should be higher.

Maybe I should add the 3 purchase invoices with all the exact items and pay them in 2017, and then Manager will do the rest automatically by adding an extra cost based on the difference between the exchange rate on Janaury 1st 2017 and the one on the date of payment?

Any idea on this?

Actually I tried something and I do think there is a problem here.

I added a Purchase Invoice for one of the items I am having troubles with. I added 1.000.000 RWF (€1.000) just to try. By doing this, the avarage cost increases by about 1.850 which is almost exactly 1.000.000 / devided by 534, which is the quantity owned, but the “quantity on hand” is only 54 as the remaining 480 are still “to be recevied” (no Goods receipt).

So it seems Manager indeed spreads this cost on all the stock, not just the on the items in stock for which there is a Godd Receipt. Otherwise the avarage cost should go up by 18.500!

@mauroskov, I believe the solution to your problem (if I understand everything you wrote correctly) lies in understanding differences between Manager and your previous accounting system.

As you set up your starting balances for inventory items in Manager, you enter the quantity on hand and the average cost to allow the program to calculate a total value for that item to post to Inventory on hand. You also must enter unpaid purchase invoices to establish the starting balance for the supplier in Accounts payable. But those pre-start-date purchase invoices do not affect the quantities in Manager, even when you later pay them. They only affect the balance of Accounts payable.

To make your inventory quantities and average cost come out correctly, you must enter starting balance information as though items from the pre-start-date invoices had already been received. Because they come from a time period before you were using Manager’s goods receipts, they were effectively owned and already on hand on the start date. The average cost should be calculated at the exchange rate in effect when you created the purchase invoice. Differences between then and the date you pay the invoice will show up in Foreign exchange gains (losses).

If the items were actually delivered after the start date, do not enter goods receipts for them. In this one case, because you included them in the starting balance, they will be counted in Quantity on Hand and average cost should be calculated correctly.

This topic has wandered from your earlier questions. I apologize if I did not make the points in this post clear enough in earlier responses. But you were asking about different things, so my answers focused on other aspects of inventory accounting.

The good news is you seem to know accurately what your average cost and quantities on hand were when you started using Manager. So as you edit your previous entries to correct things, you will be able to confirm when you have them right.

No problem at all!

In order to achieve this, should I enter the exact Purchase Invoices pre-start-date with all items? Will Manager recognise the items and calculate the forex gains (loss) on thesw specific items?

This issue was related to pre-Manager (2016) and post start date in Manager (2017).

The other issue instead is related to 2018 (and I have been adding all Purchase Invoices, Goods Recepts, etc. since beginning of 2017). The second issue is about some cost (import duties) not being spread only over the quantities of the items that were received with Goods receipts. Why is Manager spreading these costs on the full quantity i.e. also the quantity still in a bonded warehouse and hence not received with Goods receipts?

You should not have to, because Manager is only using the purchase invoice to establish the balance of Accounts payable. You should just enter what you actually paid to each supplier. If the supplier is denominated in a foreign currency, Manager will convert amounts to your base currency for purposes of calculating average cost. It will do that as of your start date. So, to be totally accurate, you should enter those pre-start-date invoices at values that reflect what they would have been worth on your start date. So there might be some spreadsheet work needed first.

To answer your second question, I’d need to know more. But, if you used the Freight-in item to allocate import duties, they would be spread across all items on the purchase invoice, whether or not the goods have been received. After all, you have paid the duties, so the costs have to go somewhere, even if you don’t have the goods yet. Only the value of the goods themselves that remain in bonded stores can be excluded from the average cost. In effect, the duties attributable to the goods in stores have been received, because you paid them. I probably did not explain that very well.

I am not sure I get this. The Purchase Invoice is in a foreign currency (Euro). If I owe to a supplier €1.000 for some specific items and specific quantiies of these items, how can Manager update the avarage cost of these specific items if the Purchase Invoice is not detailed with the list of the specific items? Maybe what you mean is that if the Purchase Invoice was €1.000 and dated October 2016 when the exchange rate was 950, and I paid it in January 2017 when the exchange rate was 980, Manager will simply add (980-950) x 1.000 to the forex losses, and all items (not just the ones in the specific Purchase Invoice) will be updated to the new exchange rate. Am I right?

Also here I don’t understand which spreadsheet work…

I have a Purchase Invoice for the items, one for transport and one for duties. The cost of the items is based on these 3 costs. Usually we receive all the goods and we pay duties on the full quantity. Instead in this case we recevied 20% of the goods and the remaining 80% is bonded. Therefore we have paid duties only on the 20% so far. I was hoping that Manager would: 1) spread transport costs over the 100% of the goods but use only the share of the 20% to calculate the cost of the goods received; 2) add duty costs only to the 20% of the goods. But apparently this is not the case and I need to find another way to go around it, which will probably be to wait for all the goods to be received…

The point I was trying to make in the two sentences you quoted first, @mauroskov, is that Manager cannot handle foreign exchange gains/losses before your start date. So you will need to do those calculations yourself in a spreadsheet so the costs are what they would have been on your start date.

As for the rest, you’ve gone beyond my experience. I haven’t imported inventory in foreign currencies since I started using Manager.

Ok I understand. Sorry to have dragged you into my mess.

I actually used Manager in a separate business to calculate the avarage cost for the pre-starting-date period. And then used those figures for the avarage cost for the starting balance in the current Manager.

One thing I tried is to change the date of the 3 unpaid Purchase Invoices. Earlier I used a date that was before the start-date, but if I date them on the start-date the value of my curent cost of goods sold and stock on hand changes. Which one is correct then? Those payable Purchase Invoices should be dated before or on/after the start date in order to have the real values?

Pre-start-date invoices only affect the customer’s/supplier’s balance in Accounts receivable/payable. They are not taken into account for inventory average cost calculations. Invoices on or after the start date affect quantities as well as values. So stock on hand (or already purchased) on the start date must be included in the starting balance for the inventory items.

Transactions that predate the start date are not really transactions of your business, as far as Manager is concerned. The program just needs a way to divide the starting balances of Accounts receivable/payable into the appropriate subsidiary ledgers for the customers/suppliers. If that was not important, you could just enter a single number for those accounts like you do for others. I hope that answers your question.

A post was split to a new topic: Cost of goods in bonded storage