Inventory Write Off Issue with accrual versus cash basis

Because I have summary page as accrual and profit and loss as cash basis I was able to pick up an error with the inventory write off. It should be the same amount as the goods were written off months ago so there is nothing outstanding as it were. Oddly enough its only the one item that has a different amount.

See picture one for accrual and picture two for cash basis

Has there been other inventory movement for the memory card? Would such movement affect the average cost? I believe a write-off will occur at average cost, which could be different if some other transaction has not fully cleared. That’s why it can be dangerous mixing accrual and cash accounting.

It’s possible for the write-off amount on cash-basis to be lower or higher than on accrual-basis.

For example, if you purchase goods but pay for them at later date. On accrual-basis your cost per unit could be different from cash-basis. Therefore any inventory write-off will reflect this too.

The issue is how can one be sure that Manager has calculated that amount correctly… well, it’s not so easy without digging around. In future, there will be View button which will take to worksheet that will explain how Manager came up with that amount.


@Tut - There has no other inventory movement for the memory card. That particular inventory item has been disabled and was the only item bought and sold and returned for that particular inventory item.

@lubos I am not following why the amount would differ in March if the purchase and payment dates were both sometime last year 2015. But if you say this is the case, then thats fine with me. Might not be a bad idea to have some kind of option to view how manager arrives at that figure. This particular item is the only item that differs between cash and accrual basis taking into account any invoices outstanding etc.

So which amount is correct, 14.72 or 12.88? Or is it neither? If you know which is correct, you can go hunting for the difference. Perhaps a tax was applied, but misallocated? Check all your other registers for a 1.84 transaction (you can do this quickly by sorting the screens on the Amount columns). Presuming one of the numbers is correct–as in it matches what you paid–the difference will be in there somewhere. If you’d had other movement on that item, it would be more difficult. In fact, check the inventory movement report first.

It could still result in different write-off amount long time after. Were there any sales between purchase and payment date?

You can send me your accounting file to and I can have a look to find the explanation.

The correct amount is ÂŁ14.72. I have determined that by deleting the credit note, sales invoice of that particular item and payment of that particular item it will show the amount as ÂŁ14.72 regardless of accrual or cash. I will have to restore the backup accounts on my laptop again and start by deleting one thing at a time to see exactly which transaction (the sale, the payment or the credit note) is causing the problem. Its not the actual writeoff that is causing the issue however.

I will be back shortly after this commercial :slight_smile:

Ok that was a long commercial. I have given up trying to find out exactly what is going on here. As I said in my email it appears to be something to do with the date of the credit note and I can change the amount by either moving the credit note date backwards in time or by moving the payment of the relevant invoice later in time!

On a second unrelated point which I discovered while I was troubleshooting this issue! Is there some reason why we now need to put in a 1 explicitly for buying and selling inventory. I was on version 15.7.35 at the beginning of this week and never needed to do so before. I have now updated to the latest version and I can see in the changelog - 24 Jan 2016 Modified purchase invoices so it’s possible to allocate cost to inventory on hand without increasing quantity 16.1.50 that you have now changed this.

Is this necessary and is it not possible to change this behaviour so that if you don’t put any quantity in that it defaults to one and find some other way to allocate cost to inventory on hand without increasing inventory. I can’t see that people would need to allocate a cost to inventory without increasing quantity too often, but people buy and sell inventory every day so it would be more efficient to cater for buying and selling inventory rather than allocating costs to inventory… Or could you change the default to be 1 and people who want to allocate cost without increasing inventory can put a zero in for those occassions?

OK, looking into your accounting file, it is indeed a bug.

What is happening is that when you created a credit note, you have allocated it against already paid invoice. This is normally not a problem but on cash-basis there is an issue I wasn’t aware before. I have to fix it.

For now, you can easily fix this issue by simply avoiding issuing credit note against already paid invoice. So edit credit note and unselect sales invoice so the credit note will be issued against Customer credits account rather than particular sales invoice.

I spent two hours on this and you found the cause in 2 minutes! Holy crap you are brilliant! :grinning: I did not realise that you were not supposed to issue credit against paid invoice. I thought that you were supposed to issue credit against the invoice that sold the item - hence the confusion. I am not sure how best you can make people aware of which invoice to credit against or whether they should credit a specific sales invoice anway.

Can you keep my accounting file for a day or two as I am going to be making a new post topic and confirming/querying that I have got everything correct as far as workflow goes! For example I am going to be changing the accounts to use the suppliers invoice number in ref field and not my invoice number because that way the program will display the suppliers invoice in the remittance advice. I want to start off the new tax year in April with the accounts 100% correct in terms of how I am using the program and get rid of all these little anomalies, like this issue and not seeing the code in purchase orders because I was using the code field for names etc!

I am going to be doing a post in about 30 minutes, but I need a break from the PC. Thanks

PS - what do you think of my sub accounts grouping for the summary page. That has really helped make the summary page work for me a lot better. When sub account headings get totals showing on summary page like profit and loss statement, the summary page will be back to its usual brilliance.

You can. But on cash-basis there is an issue which needs to be fixed.

Bottom line is that credit note is a standalone transaction. It has all information it needs. No need to specify which invoice credit note is related to.

I actually didn’t look at anything unrelated to this issue. So I didn’t even notice what you’ve done with summary screen.

@dalacor See here for Quantity issue you mentioned in your second unrelated point Possible bug when invoicing inventory items?

Thank you sir. I have looked at that topic and I will add my voice to the request to set quantity to default to one as this results in the least clicks and also prevents problems in the future with new users creating loads of inventory purchases and sales and then discovering that their inventory quantity is not what it should be.

Not a major problem, but if you take the - away from the begining of the url, you can make the url clickable. Thanks

@lubos, I am not sure if this is by design or a bug, but I also noticed that in inventory value movement, when you buy and sell an item, then do a credit return and inventory write off, the inventory movement is not the cost of one item, but rather it appears to be assuming that you have bought and sold/disposed of two items! I don’t really know that I will ever use this particular report much - the only sole reason I was using it was because @Tut suggested using this report to diagnose the issue in this topic.

Hi @lubos, after updating to the latest version, I now see that inventory write - offs is showing as incl tax on summary page and I appear to owe ÂŁ3.52 in tax which I did not before the update. Checking my VAT returns for the last year shows that I do not owe any VAT tax and checking another expense accounts shows the items as ex vat, so something is not quite right with the inventory write off - it makes no difference whether using accrual or cash basis for this particular issue.