If I understand correctly you accurately reported your net Vat but mutually falsified your total sales 2 years ago. The other business wants to not correct it as they chose to do it that way 2 years ago so are even less interested in correcting it now.
So your options are
to try and force a correction for the error 2 years ago.
wear the taxation loss by under claiming your business expenses. That way you are in the clear from the tax authorities.
be comfortable to fight the taxation interpretation with your tax authorities should it be questioned.
why do we have to do a journal entry when this is exactly what a credit note in Manager does. while this may or may not solve my issue with the inventory average cost, what should i later do to provide a credit note to my customer which is the legally acceptable transaction against their debit note.
I only offered it as a suggestion @sharpdrivetek in an attempt to assist you with the issue.
It appears to me (I may be wrong) that this may be an outsourcing offset arrangement similar to what I experienced in a previous job.
In Australia the legal advice was that there needed to be invoices issued by both organisations with offset happening at the payment stage. This required journals between AR/AP to adjust to the net amount.
Of course, there are probably different legalities in your country of operation.
But journal entry does not do exactly what credit note does. Credit note assumes the inventory items on it are customer returns which has implications to your P&L. Currently credit note has no mechanism to simply debit inventory items. Journal entry has this mechanism, thatâs why @generalegend has correctly suggested it.
Perhaps in future, I will make it so credit notes can simply debit inventory items too. This would be useful when purchasing inventory items from customer. Not common but exactly what happened in this case.
I agree there is the opportunity for Managers to support more advanced relation ships with other organizations such as
Organization which is both a customer and supplier
Organization with several divisions
The former is discussed with implementation possibilities here
As for the work around
I agree business transactions with another organization can be entered as
Sale and a separate purchase transactions or
Debit and a separate credit note
Both can result it the same net VAT to the tax authority
I do not however believe they are truly equivalent though; as they result in reporting different total sales and total purchases consistent with the different business transactions they are designed to describe. It is for that reason enhanced support of business relationships make more sense to me than enhanced support for a work around.
thank you for your suggestion. i did not mean to offend you. i had already tried your suggestion and various other methods but none of it was a solution which would be acceptable to our tax authorities.
i will wait for this to be implemented. i hope this makes it easier for handling purchases from customers.
my transaction in point is a purchase return where the customer was unable to sell the products bought from us and therefore returned the same at exactly the same price. a purchase return and purchase affects the P&L differently. a purchase is an asset while a purchase return is a reduction from your sales profit and addition to your asset. so when entering a purchase return as a credit note, we as a business expect the average cost of the returned items to match the price at which they were received just like a transaction from purchase invoice. when the cost for items received by credit note is calculated by prior average costs it does not give a correct figure to your asset value. this is because when you receive a product back, the inventory cost naturally goes up considering a minimum of the transportation involved. you cannot average it with the other inventory which has not moved out of the business yet.
normal inventory movement:
Cost price â Selling price
enable Freight-in similar to Purchase Invoices for credit notes. this should not affect the credit note total because we are not giving it as a credit but only a cost addition/reduction to inventory. the freight-in value would help the user input a value that can determine the new cost of inventory.
provide a checkbox which gets an input from the user whether the inventory should be added back in stock with their absolute values.
This will directly put the qty and amount to inventory. Useful for your use case where your customer is acting as a supplier and you are simply purchasing items from them.
@lubos looks like the improvement works as designed. but this is useful only for purchases from a customer. this would be useful for users who are making purchases from a customer. but i guess it will have to be improved in the future such that these transactions are listed under Purchase Invoices and reduces the Accounts receivable if the user chooses to do so.
anyway like i had already explained this method is not suitable for sales returns (which was my scenario) as my profits have now gone up. also, this new method has no effect on the Total cost of the inventory item. even though the credit note now calculates the average cost like purchase invoices, the successive sales average costs have increased which results in the same Total cost as before. maybe if there was a similar method to control the average cost for Sales Invoices when the user needs, it would help report the correct value of assets.
Credit notes reduce accounts receivable. Not sure what you mean by being listed under Purchase Invoices, they are still credit notes so they will be under Credit Notes tab.
Your scenario was sales return? I thought you were purchasing something from your customer, it wasnât sales return.
i thought maybe this is the design you are going to follow in case you want to link customer who is also a supplier and vice versa. in case your customer is selling something to you, they are normally going to issue a sales invoice which we will enter as a purchase invoice. not as a credit note. this is what i basically meant.
i am sorry i just checked my earlier posts and had incorrectly used the term purchase return (since it is a purchase for me) instead of sales return. but regardless it should obviously had to be a sales return because we are discussing about credit notes to a customer. a literal purchase return would have involved debit notes and suppliers.
No. I still maintain that if you have customer who is also a supplier, there should be two separate accounts. Itâs cleaner, much easier to follow and reconcile if you donât mix sales and purchases together.
However, for those who want to mix it together (your use case), you can purchase from your customer using credit notes (what normally youâd do using purchase invoices to separate supplier account)
