Issue with credit note

Please I noticed that credit notes only report total aggregate cost of inventory but not allocate it to various tracking code or sites. This also affect profit and loss report when view per site or tracking code. Please I need urgent help on this.

Your complaint is not clear. Report aggregate cost of inventory where? Not allocate to what tracking code? And what “sites” are you referring to?

A manually created credit note, of course, requires that you select the tracking code, just as you must fill in every other field manually.

A credit note created by copying from a sales invoice carries forward tracking codes on a line by line basis from the sales invoice.

Please illustrate exactly what you are referring to with screen shots.

This profit & Loss report with item “Max cube” under the “WODP” tracking code, when drill down, I get the detail as shown below: For that same item and there is debit and credit column as pointed out. The sales value appear in credit while credit note appear in Debit. My worry is that when I get to cost of sales for the same item and report, I realized that there is no credit column and credit note value does not affect the balance as shown below: . There is no credit coloumn to capture credit note here and therefore made the report of separate site wrong from the reality.

Your screen shot of drilling down on your income account for Max CUBE does not show any credit note. So it is impossible to tell anything. If it is there, your screen shot needs to show it.

It would also help to see the structure of your chart of accounts.

And, it would be useful to see the Edit screen for whatever inventory items are involved, to see where related transactions are posted.

Hello May be I did not explain myself very well. I said all my credit notes only deducted value from sales and not from cost of sales. This thing happened to all my inventory items that have credit note in the period. I expect to see debit and credit side when drilling down the cost of sales but I only see debit side and I have some credit note posted in the period.

You explained yourself well enough. But you did not illustrate the problem as requested. So I cannot guess what happened.

OK. here:

This is my P&L report selection. This is the report of it that shows sales line and cost of sales line. Drilling down to first product on sales, i find this with the credit note on debit side which is normal: When I check the same product in cost of sales, there is no credit note cost reflected and the figure is above the right figure by the credit note value: .You can see there is no credit side column here and this report does not give through figure of the correct line. The credit note reflected on inventory item rightly but it is showing or reflecting in the segment report here.

… " but not showing or reflecting in the segment report here"

This was the most important thing I requested. Without it, I have no idea where you will find transactions related to this inventory item.

Is this what you mean sir? this issue is important to us please.

No, I am looking for the Edit screen of the inventory item itself. It will look like this, but of course be filled in:

This is it sir.

OK. Thank you. Now we are making progress. Your inventory item, Ginomax chicken cubes, is set up properly to post to custom income and expense accounts. So we need to figure out why that is happening. (This is, no doubt, what you wondered from the beginning. But without access to your accounting records, I needed to come up to speed.)

As a next step, post a screen shot of the Edit screen for credit note #130.

Please find it.

I see this credit note is not associated with a sales invoice. What happens if you do that?

Also, did you have any of this item in inventory before the credit note?

. Yes the credit note is not associated with a sales invoice but as read from the guide I expect it to add the item to inventory balance and credit the customer. The item has balance before this credit note as shown above.

The situation turns out to be more complicated than you wrote about. Here is what happened:

  • At the end of the day on 21/01/2020, you had zero stock of this item and, therefore, no average cost. Manager must wait until there are more purchases to calculate an average cost to assign to this inventory item and, therefore, to be able to determine the cost of goods sold on any future sales transactions. But more units were never purchased.
  • On 04/02/2020, you sold 1 unit you did not have, creating a backorder situation. There is still no average cost, because you have not purchased any additional units. So as far as the program is concerned, the cost of goods for this sale was zero.
  • The same date, you entered a credit note for 2 units. Because there was no average cost history, Manager could not credit the Inventory - cost account. Normally, the program looks back in time to the cost of goods of the most recent sales of an item. But your most recent sales were from a backordered condition, so there would be no cost of goods.
  • You then have two more credit notes on 12/3/2020 and 21/03/2020 for 11 total units. Again, no sales to look back to for cost of goods. And still no purchases to establish a new average cost.
  • Finally, you sold 10 units on sales invoice #2754. But look what happened. The sales amount was 37,000. But the cost of goods was 38,328.12—more than the sales amount. This is the only sales transaction you have shown for which cost of goods was more than the sales amount. Several factors could be responsible. You might have purchased more units at a higher unit price than the 3,350 average cost evident in several earlier transactions. There would also have been an effect from zero costs of goods being transferred back to Inventory on hand. To understand that, we would have to look at purchase history.

In summary, the lack of a credit to the cost of goods account seems to be the result of a unique sequence of events where you depleted all stock, then replenished it entirely from a series of credit notes. Eventually, as more of this inventory item was purchased and sold, the average costs would stabilize at rational levels. Then, a credit note would generate the expected credit to this account. And in the long run, total costs would work themselves out. What you are seeing is one of the disadvantages of average cost inventory valuation systems.

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Infact, your explanation is good and thank you for the time taking you for this. But I also noticed from below report that:

Aggregate figure of cost of sales is different from the addition of individual sites there, the difference is the value of credit note for the period. By interpretation, the system deduct credit note from the total value of cost of sales but fail to deduct it from individual sites. I don’t know if you understand me, If we add all the lines from second arrow, it will not give 7,699,073.68 The difference is credit note. Can I say credit note is not applicable to sites report but combine total? I can still give more explanation if needed. Thanks

In my very first response, I asked you what you were referring to by “sites.” You never answered. And it still is not clear. There are no “sites” in the program. Are you, by chance, referring to inventory locations?

You seem to misunderstand my earlier explanation. You now state that the program fails to deduct the value of cost of sales from individual “sites,” whatever you mean by that. But for the transaction we have discussed, there is no cost of sales to deduct.

You also seem to believe that your last column on your Income Statement is a total of the previous columns. It is not. All columns are independent calculations. There is no reason to think the first six columns should sum to equal the last.

Thank you. What I mean by site is tracking codes created and attached with individual inventory location. Each of the column is a tracking code and the last column represent all the tracking code together which deduct the cost of sales.