I am looking at Manager to hopefully apply the software for a farming operation. I need to issue materials to various crops when planting and throughout the duration of the crop till harvesting. Would it be wrong in applying the Write-off of inventory for purposes of Issuing the materials?
writing off inventories will not look good on your accounts.
you can make Production Orders for each stage during harvesting.
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Farming inputs, fertilizers, seeds etc provides an interesting challengers for accounting.
When you first purchase the inputs they are readily identifiable as Inventory.
However once they are used, then they are gone - unrecoverable.
Therefore you need to determine if their usage is a current expense or has a future value.
If it is a current expense (a loss regardless of the crop outcome) then you would use Inventory Write-off but I would create specific P&L Expense accounts in which the write-off is allocated. For example it could be called Crop Inputs, or Crop Inputs - Wheat and Crop Inputs - Corn etc.
However, if it has a future value, investment in the crop until it is harvested, then you transfer the inputs from Inventory to Work-in Progress via the Production Order.
Whilst the Work-in Progress item “Corp Inputs - Wheat” would still be an inventory item it would be setup under a different Inventory control account.
This approach maybe useful if the 2017 harvest is stored in silos and not sold until 2019.
The Work-in Progress crop input item still needs, when the crop is sold or fails, to be transferred to the P&L via an Inventory Write-off - not via a sales invoice.
With the Production Order you could also add in other inputs to the Work-in Progress such as tractor fuel, labour, weed control etc
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There is another way of looking at the situation. You might decide to simply account for input materials as consumable supplies, posted to current expense accounts. They will be deducted from income to determine net profit. This would be more appropriate if everything you buy is used the same year, less appropriate if it is stored and used over multiple accounting periods. Likewise, if you purchase something like hail insurance, that would be a current expense. The deciding factors would be whether there is any future use for a portion of whatever you buy, whether you will count or monitor remaining quantities on hand, and so forth.
There is also little point in doing any of this unless you are going to make active use of the information to value the resulting crop as inventory held for sale. Something like wheat, which might be stored waiting for good prices, would be a good candidate to treat as finished inventory. Lettuce that must be sold within a day or two might not be worth the effort, as the net profit of the business becomes clear in a shorter time frame.
I agree with @Brucanna that farming presents some accounting challenges. My main message is to think carefully about the benefits of detailed records before plunging into keeping them. Ask yourself what you will do with various pieces of information. If they will not influence your decisions, maybe it is not important to record them.
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Thank you to all respondents. Your inputs are of great value.